CHAPTER 6-01 Department of Financial Institutions

6-01-01. Management and control — State department of financial institutions — Local ordinances preempted.

The state department of financial institutions is under the supervision of the state banking board, state credit union board, and a chief officer designated as the commissioner of financial institutions. The state department of financial institutions has charge of the execution of all laws relating to state banks, trust companies, credit unions, building and loan associations, mutual investment corporations, mutual savings corporations, banking institutions, and other financial corporations, exclusive of the Bank of North Dakota. A local governing body may not adopt or enforce a resolution or an ordinance regulating a financial institution, financial corporation, or credit union.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 1; C.L. 1913, § 5146, subs. 1; S.L. 1931, ch. 96, § 1, subs. a; 1933, ch. 71, § 1; R.C. 1943, § 6-0101; S.L. 1945, ch. 143, § 1; 1957 Supp., § 6-0101; S.L. 1969, ch. 96, § 1; 1977, ch. 64, § 1; 1993, ch. 65, § 1; 2001, ch. 88, § 2; 2007, ch. 77, § 1; 2013, ch. 77, § 1.

Cross-References.

Governor’s power to appoint majority of members of boards, see § 54-07-01.2.

Notes to Decisions

Appeal from Orders of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 160 N.W. 705, 1916 N.D. LEXIS 173 (N.D. 1916).

Commissioner.

The commissioner is not an independent public officer. He is an agent of the banking board and subject to its control. Youmans v. Hanna, 35 N.D. 479, 161 N.W. 797, 1916 N.D. LEXIS 173 (N.D. 1917).

Control of Banks.

State banks are managed and controlled by state banking board. McLaughlin Oil Co. v. First State Bank, 79 N.D. 525, 57 N.W.2d 860, 1953 N.D. LEXIS 59 (N.D. 1953).

Insolvency of Bank.

It is the duty of the state examiner whenever any bank shall be closed as insolvent to certify such fact to the attorney general. Baird v. Forbes State Bank, 64 N.D. 239, 251 N.W. 846, 1933 N.D. LEXIS 270 (N.D. 1933).

Regulations.

Bank exchange regulations may be adopted by the state banking board under section 6-01-04. McLaughlin Oil Co. v. First State Bank, 79 N.D. 525, 57 N.W.2d 860, 1953 N.D. LEXIS 59 (N.D. 1953).

6-01-01.1. Regulatory fund established — Uses — Appropriation.

  1. There is created a special fund designated as the financial institutions regulatory fund. The amounts received under the following chapters, and any other moneys received by the department of financial institutions, must be deposited into this fund: chapters 6-01, 6-03, 6-05, 6-06, 6-10, 13-04.1, 13-05, 13-08, 13-09, 13-10, and 13-11.
  2. All moneys deposited in the financial institutions regulatory fund are reserved for use by the department of financial institutions to defray the expenses of the department in the discharge of its administrative and regulatory powers and duties as prescribed by law, subject to the applicable laws relating to the appropriation of state funds and to the deposit and expenditure of state moneys. The department of financial institutions is responsible for the proper expenditures of these moneys as provided by law.
  3. Any cash balance in the financial institutions regulatory fund after all current biennium expenditures are met must be carried forward in the financial institutions regulatory fund for the next succeeding biennium.
  4. All moneys derived from the investment of any portion of the financial institutions regulatory fund must be credited to the fund.

Source: S.L. 1989, ch. 96, § 1; 1997, ch. 141, § 1; 2001, ch. 88, § 3; 2005, ch. 128, § 1; 2007, ch. 78, § 1; 2009, ch. 141, § 1; 2011, ch. 108, § 1; 2021, ch. 76, § 1, effective April 13, 2021.

6-01-02. Definitions.

As used in this title, unless the context or subject matter otherwise requires:

  1. “Association”, “banking association”, or “state banking association” means any corporation organized under the laws of this state covering state banking associations, and all corporations, limited liability companies, partnerships, firms, or associations whose business in whole or in part consists of the taking of money on deposit, except national banks, trust companies, and the Bank of North Dakota.
  2. “Bank” means any national bank, national banking association, corporation, state bank, state banking association, or savings bank, whether organized under the laws of this state or of the United States, engaged in the business of banking.
  3. “Bank holding company” means bank holding company as defined in 12 U.S.C. 1841(a)(1).
  4. “Banking” means the business of receiving deposits, making loans, discounting commercial paper, issuing drafts, traveler’s checks, and similar instruments, handling and making collections, cashing checks and drafts, and buying and selling exchange.
  5. “Banking department” means the state department of financial institutions.
  6. “Banking institution” means any bank, trust company, or bank and trust company organized under the laws of this state.
  7. “Branch” means a place of business where deposits are received, checks paid, or money lent as a result of a bank that was merged into another bank pursuant to an interstate merger.
  8. “Commissioner” means the commissioner of financial institutions.
  9. “Corporate central credit union” means a credit union operated for the primary purpose of serving corporate accounts. A credit union is deemed to be a corporate central credit union when its total dollar amount of outstanding corporate loans plus corporate share and deposit holdings is equal to or greater than seventy-five percent of its outstanding loans plus share and deposit holdings.
  10. “Credit union” means a cooperative, nonprofit association organized for the purposes of encouraging thrift among its members, creating a source of credit at a fair and reasonable rate of interest, and providing an opportunity for its members to improve their economic and social condition.
  11. “Derivative transaction” means derivative transaction as defined in 12 U.S.C. 84(b)(3).
  12. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
  13. “Electronic communication” means any form of communication, not directly involving the physical transmission of paper that creates a record that may be retained, retrieved, and reviewed by a recipient of the communication and may be directly reproduced in paper form by the recipient through an automated process.
  14. “Electronic record” means a record created, generated, sent, communicated, received, or stored by electronic means.
  15. “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a record and signed or adopted by a person with the intent to sign the record.
  16. “Financial corporation” means all entities regulated by the department of financial institutions, excluding financial institutions and credit unions.
  17. “Financial institution” means any bank, industrial loan company, or savings and loan association organized under the laws of this state or of the United States.
  18. “Market value” means the highest price for which property can be sold in the open market by a willing seller to a willing purchaser, neither acting upon compulsion and both exercising reasonable judgment.
  19. “Merger” or “merge” means the merging or consolidation of two or more banks including the purchase of all or substantially all of the assets and assumption of liabilities of a bank, facility, or branch.
  20. “Mutual investment corporation” or “mutual savings corporation” means a corporation organized to engage in the investment or savings business, but having no capital stock or a nominal capital stock.
  21. “National bank” or “national banking association” means an institution chartered by the comptroller of the currency under the National Bank Act [12 U.S.C. 24].
  22. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
  23. “Technology service provider” includes any person that provides services to a financial institution, financial corporation, or credit union, including: core processing; information and transaction processing and settlement activities that support banking functions such as lending, deposit-taking, funds transfer, fiduciary, or trading activities; internet-related services; security monitoring; and system development and maintenance.
  24. “Tier 1, tier 2, and tier 3 capital” means those terms as set under title 12, Code of Federal Regulations, part 325, in effect on August 1, 2011.
  25. “Trust company” means any corporation formed for the purpose of transacting business as an annuity, safe deposit, surety, or trust company.

Source: S.L. 1925, ch. 92, § 12; 1925 Supp., § 5191a12; S.L. 1931, ch. 93, § 1; 1931, ch. 96, §§ 1, 6; 1933, ch. 71, § 1; 1935, ch. 92, §§ 1, 6; 1935, ch. 95, § 1; 1935, ch. 108, § 1; 1937, ch. 93, § 1; R.C. 1943, § 6-0102; S.L. 1963, ch. 93, § 1; 1977, ch. 64, § 2; 1979, ch. 135, § 1; 1981, ch. 105, § 1; 1985, ch. 111, §§ 1, 2; 1993, ch. 54, § 106; 1993, ch. 66, § 1; 1993, ch. 67, § 1; 1995, ch. 79, § 1; 2001, ch. 88, § 4; 2007, ch. 79, § 1; 2009, ch. 93, § 1; 2011, ch. 74, § 1; 2011, ch. 76, § 1; 2013, ch. 77, § 2; 2015, ch. 80, § 1, effective July 1, 2015.

Notes to Decisions

Trust Companies.

This section expressly excludes trust companies from the definition of “banking associations” but includes them in the definition of “banking institutions”. Nelson v. Dakota Bankers Trust Co., 132 N.W.2d 903, 1964 N.D. LEXIS 154 (N.D. 1964).

The fact that bankrupt was a “trust company” instead of a “state banking association” under this section did not preclude it from being a “banking corporation” within meaning of § 4 of federal Bankruptcy Act, and as such it was not entitled to file a voluntary petition in bankruptcy. First American Bank & Trust Co. v. George, 540 F.2d 343, 1976 U.S. App. LEXIS 7899 (8th Cir. N.D.), cert. denied, 429 U.S. 1011, 97 S. Ct. 634, 50 L. Ed. 2d 620, 1976 U.S. LEXIS 3891 (U.S. 1976), decided prior to the enactment of N.D.C.C. chapter 6-05.1.

6-01-03. State banking board and state credit union board.

  1. The state banking board consists of the commissioner and six members to be appointed by the governor, four of whom must each have had at least five years’ experience in an executive capacity in the management of a state bank in the state of North Dakota, one of whom must have at least five years’ experience in an executive capacity in the management of any state or national bank in North Dakota, and one of whom must be a laymember from the public at large. The term of office of the members of the board, other than the commissioner, is for a period of five years. In case of a vacancy in the board, by death, resignation, or removal of an appointed member, the vacancy must be filled by appointment by the governor for the unexpired term. The commissioner is the chairperson of the board and the attorney general is, ex officio, the attorney for the board. The assistant commissioner shall serve as its secretary. The board shall hold regular meetings in January, March, May, July, September, and November of each year and special meetings at the call of the commissioner in such place as the commissioner may designate within the state of North Dakota. The members of the board, other than the commissioner, shall receive one hundred dollars per day while attending meetings, or in the performance of such special duties as the board may direct. Expense reimbursements for meals, lodging, and transportation must be at the same rate as those allowed state employees.
  2. The state credit union board consists of the commissioner and four members to be appointed by the governor. Two of the members of the state credit union board must have at least five years’ experience as an officer, director, or committee member of a North Dakota state-chartered credit union, one member of the board must have had at least five years’ experience as an officer, director, or committee member of a state-chartered or a federally chartered credit union, and one member of the board must be a laymember from the public at large. The term of office of appointed board members is five years. In case of a vacancy in the board, by death, resignation, or removal of an appointed member, the governor shall appoint an individual to fill the vacancy for the unexpired term. The commissioner chairs the board and the attorney general is, ex officio, the attorney for the board. The assistant commissioner shall serve as its secretary. The members of the state credit union board are entitled to receive the same remuneration as is provided for the members of the state banking board. The state credit union board shall hold meetings in March, June, September, and December of each year and special meetings at the call of the commissioner in such places as the commissioner may designate within the state.
  3. The word “board” when used in this title includes the state banking board and the state credit union board.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 2; C.L. 1913, § 5146, subs. 2; S.L. 1931, ch. 96, § 1, subs. b; 1933, ch. 71, § 2; 1943, ch. 91, § 1; R.C. 1943, § 6-0103; S.L. 1945, ch. 143, § 2; 1957 Supp., § 6-0103; S.L. 1969, ch. 97, § 1; 1977, ch. 65, § 1; 1979, ch. 113, § 1; 1979, ch. 114, § 1; 1983, ch. 109, § 1; 1985, ch. 112, § 1; 1997, ch. 78, § 1; 2007, ch. 80, § 1; 2011, ch. 74, § 2.

Cross-References.

Governor’s power to appoint majority of members of board, see § 54-07-01.2.

Notes to Decisions

Administrative Agency Act.

The state banking board is an administrative agency within the definition of N.D.C.C. § 28-32-01 and is therefore subject to the procedural requirements of N.D.C.C. ch. 28-32. First Am. Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 1972 N.D. LEXIS 149, 1972 N.D. LEXIS 177 (N.D. 1972).

Appeal from Orders of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 161 N.W. 797, 1916 N.D. LEXIS 173 (N.D. 1917).

State Banking Board.

The state banking board appointed under this section manages and controls state banks. McLaughlin Oil Co. v. First State Bank, 79 N.D. 525, 57 N.W.2d 860, 1953 N.D. LEXIS 59 (N.D. 1953).

There is no inherent reason why bankers should not sit on a banking board, and where their membership on the board bears a reasonable relationship to the function of the board and does not exclude any segment of the banking community, the board is not, ipso facto, unconstitutional. First Am. Bank & Trust Co. v. Ellwein, 221 N.W.2d 509, 1974 N.D. LEXIS 190 (N.D.), cert. denied, 419 U.S. 1026, 95 S. Ct. 505, 42 L. Ed. 2d 301, 1974 U.S. LEXIS 3421 (U.S. 1974).

6-01-04. Powers and duties of the state banking board and state credit union board.

The state banking board may adopt rules for the government of financial institutions and trust companies mentioned in section 6-01-01 to the extent the rules do not conflict with any law of this state or of the United States. The state banking board shall make and enforce such orders as are necessary or proper to protect the public and the depositors or creditors of those financial institutions and trust companies.

The same powers are given to the state credit union board with reference to credit unions as are granted to the state banking board with reference to financial institutions and trust companies named in this chapter.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 3; C.L. 1913, § 5146, subs. 3; S.L. 1931, ch. 96, § 1, subs. c; 1933, ch. 71, § 3; R.C. 1943, § 6-0104; S.L. 1945, ch. 143, § 3; 1957 Supp., § 6-0104; S.L. 1997, ch. 78, § 2; 2013, ch. 77, § 3.

Notes to Decisions

Appeal from Orders of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 161 N.W. 797, 1916 N.D. LEXIS 173 (N.D. 1917).

State banking board’s power to review the bank examiner’s reports necessarily implies that examiner’s actions in taking possession of a bank pursuant to this section are subject to review by the board and to judicial review on appeal from the board. First Am. Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 1972 N.D. LEXIS 149, 1972 N.D. LEXIS 177 (N.D. 1972).

Bank Exchange Regulations.

Regulations governing bank exchange may be adopted by the state banking board under this section. McLaughlin Oil Co. v. First State Bank, 79 N.D. 525, 57 N.W.2d 860, 1953 N.D. LEXIS 59 (N.D. 1953).

Powers and Duties of State Banking Board.

The powers and duties of the State Banking Board allow for the enforcement of such orders as in its judgment may be necessary or proper to protect the public and the depositors of a financial institution. First Am. Bank & Trust Co. v. Ellwein, 221 N.W.2d 509, 1974 N.D. LEXIS 190 (N.D.), cert. denied, 419 U.S. 1026, 95 S. Ct. 505, 42 L. Ed. 2d 301, 1974 U.S. LEXIS 3421 (U.S. 1974).

6-01-04.1. Removal of officers, directors, and employees of financial corporations or institutions.

  1. The department of financial institutions or the board may issue and serve, upon any current or former officer, director, or employee of a financial corporation, financial institution, or credit union subject to its jurisdiction and upon a financial corporation, financial institution, or credit union involved, an order stating:
    1. That the current or former officer, director, or employee is engaging, or has engaged, in any of the following conduct:
      1. Violating any law, regulation, board order, or written agreement with the board.
      2. Engaging or participating in any unsafe or unsound practice.
      3. Performing any act of commission or omission or practice which is a breach of trust or a breach of fiduciary duty.
    2. The term of the suspension or removal from employment and participation within the conduct of the affairs of a financial corporation, financial institution, or credit union.
  2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32. The date for the hearing must be set not less than thirty days after the date the complaint is served upon the current or former officer, director, or employee of a financial corporation, financial institution, or credit union. The current or former officer, director, or employee may waive the thirty-day notice requirement.
  3. If no hearing is requested within twenty days of the date the order is served upon the current or former officer, director, or employee, or if a hearing is held and the board finds that the record so warrants, and if the board finds that a financial corporation, financial institution, or credit union has suffered or will probably suffer significant loss or other significant damage or that the interest of its depositors, shareholders, members, or creditors could be seriously prejudiced, it may enter a final order suspending or removing the current or former officer, director, or employee. The current or former officer or employee may request a termination of the final order after a period of no less than three years.
  4. A contested or default suspension or removal order is effective immediately upon service on the current or former officer, director, or employee and upon a financial corporation, financial institution, or credit union. A consent order is effective as agreed.
  5. Any current or former officer, director, or employee suspended or removed from any position pursuant to this section is not eligible, while under suspension or removal, to be employed or otherwise participate in the affairs of any financial corporation, financial institution, or credit union or any other entity licensed by the department of financial institutions until the suspension or removal is terminated by the department of financial institutions or board.
  6. When any current or former officer, director, employee, or other person participating in the conduct of the affairs of a financial corporation, financial institution, or credit union is charged with a felony in state or federal court, involving dishonesty or breach of trust, the commissioner may immediately suspend the person from office or prohibit the person from any further participation in a financial corporation’s, financial institution’s, or credit union’s affairs. The order is effective immediately upon service of the order on a financial corporation, financial institution, or credit union and the person charged, and remains in effect until the criminal charge is finally disposed of or until modified by the board. If a judgment of conviction, a federal pretrial diversion, or similar state order or judgment is entered, the board may order that the suspension or prohibition be made permanent. A finding of not guilty or other disposition of the charge does not preclude the commissioner or the board from pursuing administrative or civil remedies.

Source: S.L. 1985, ch. 113, § 1; 1997, ch. 79, § 1; 2001, ch. 88, § 5; 2009, ch. 94, § 1; 2011, ch. 74, § 3.

6-01-04.2. Cease and desist orders.

  1. The department of financial institutions or the board may issue and serve upon a financial corporation, financial institution, or credit union subject to its jurisdiction a complaint stating the factual basis for the department’s or board’s belief that the financial corporation, financial institution, or credit union is engaging in any of the following conduct:
    1. An unsafe or unsound practice.
    2. A violation in the past or on a continuing basis of any law, regulation, board order, or written agreement entered into with the board.
  2. The complaint must contain a notice of opportunity for hearing pursuant to chapter 28-32. The date for the hearing must be set not less than thirty days after the date the complaint is served upon the financial corporation, financial institution, or credit union. The financial corporation, financial institution, or credit union may waive the thirty-day notice requirement.
  3. If the financial corporation, financial institution, or credit union fails to respond to the complaint within twenty days of its service, or if a hearing is held and the board concludes that the record so warrants, the board may enter an order directing the financial corporation, financial institution, or credit union to cease and desist from engaging in the conduct which was the subject of the complaint and hearing and to take corrective action.
  4. The commissioner or the board may enter an emergency, temporary cease and desist order if the commissioner or the board finds the conduct described in the complaint is likely to cause insolvency, substantial dissipation of assets, earnings, or capital of the financial corporation, financial institution, or credit union, or substantial prejudice to the depositors, shareholders, members, or creditors of the financial corporation, financial institution, or credit union. An emergency, temporary cease and desist order is effective immediately upon service on the financial corporation, financial institution, or credit union and remains in effect for no longer than sixty days or until the conclusion of permanent cease and desist proceedings pursuant to this section, whichever is sooner. An emergency, temporary cease and desist order may be issued without an opportunity for hearing. A bank or credit union may request a hearing before the state banking board or state credit union board within ten days of the order to review the factual basis used to issue the emergency, temporary cease and desist order. The decision made by the board during this hearing will be final. If a hearing is not requested, the initial decision of the commissioner or board will be final.

Source: S.L. 1985, ch. 114, § 1; 1987, ch. 102, § 1; 2001, ch. 88, § 6; 2011, ch. 74, § 4; 2021, ch. 77, § 1, effective August 1, 2021.

6-01-04.3. Assessment of civil money penalties.

  1. The commissioner or the board may assess a civil money penalty against a financial institution, financial corporation, or credit union, or an officer, director, employee, agent, or person participating in the conduct of the affairs of the financial corporation, financial institution, or credit union upon finding one or more of the following:
    1. Failure to comply with a permanent or temporary cease and desist order that has been voluntarily consented to or issued pursuant to section 6-01-04.2;
    2. Failure to comply with a final order that has been voluntarily consented to or issued following formal proceedings under chapter 28-32;
    3. Payment of dividends in violation of section 6-03-36;
    4. Loans and leases to one borrower or concern which exceed the limitations set forth in sections 6-03-59 and 6-03-59.1;
    5. Loans to directors, officers, and employees in violation of section 6-03-60;
    6. The intentional filing of inaccurate or misleading call reports required by section 6-03-70 or 6-06-08;
    7. Violations of loan limitations under subsection 1 of section 6-06-12 or title 12, chapter 7, Code of Federal Regulations, subchapter A, part 723, as amended February 5, 2019;
    8. Loans in violation of section 6-06-14.1; or
    9. Failure to file notice of change of control under section 6-08-08.1.
  2. The commissioner or the board commences administrative proceedings to assess civil money penalties by serving a complaint on the respondent stating the factual basis for the commissioner’s or board’s belief that a violation has occurred and the amount of civil penalties that the complaint seeks to impose. The complaint must contain a notice of an opportunity for an administrative hearing conducted under chapter 28-32. The date for the hearing must be set not less than thirty days after the date the complaint is served upon the respondent. If assessment of civil money penalties are proposed based on conditions described in subdivisions c through i of subsection 1, a complaint may not be filed unless the respondent has been provided with prior orders, examination reports, or other written communications, and has willfully refused to take corrective action that the respondent was capable of taking at the time.
  3. If the respondent fails to answer the complaint within twenty days of its service, the commissioner or board may enter an order imposing civil money penalties upon the respondent. If a hearing is held and the board concludes that the record so warrants, the board may enter an order imposing civil money penalties upon the respondent. The assessment order is effective and enforceable immediately upon service or upon a date specified in the order, and remains effective and enforceable until it is stayed, modified, terminated, or set aside by action of the board or a reviewing court.
  4. In determining the amount of civil penalty imposed, the commissioner or board shall consider whether good faith was exercised, and the gravity of the violation and any previous violations. The commissioner or board may not impose a civil money penalty in excess of one hundred thousand dollars for each occurrence and one thousand dollars per day for each day that the violation continues after service of an order. Any civil money penalties collected under this section must be paid to the department of financial institutions and deposited in the financial institutions regulatory fund.

Source: S.L. 1989, ch. 97, § 1; 1997, ch. 78, § 3; 2005, ch. 86, § 1; 2011, ch. 74, § 5; 2013, ch. 77, § 4; 2021, ch. 76, § 2, effective April 13, 2021.

6-01-04.4. Prompt corrective action.

The commissioner or board may enter an order if the commissioner or board finds that a state bank is undercapitalized, significantly undercapitalized, or critically undercapitalized. For the purpose of this section, undercapitalized, significantly undercapitalized, and critically undercapitalized have the same definition as found in title 12, Code of Federal Regulations, part 324, section 403, as amended April 15, 2016. The order may require an undercapitalized state bank to take prompt corrective action as the commissioner or board determines reasonable to bring the bank to an adequately capitalized condition, including the submission and implementation of an acceptable capital restoration plan. A bank may request a hearing before the state banking board within ten days of the order to review the factual basis used to issue the request for prompt corrective action. The decision made by the board during this hearing is final. If a hearing is not requested, the initial decision of the commissioner or board is final. For a significantly or critically undercapitalized state bank, the commissioner or board may issue a temporary cease and desist order appointing a receiver in accordance with chapter 6-07.2.

Source: S.L. 1999, ch. 72, § 1; 2015, ch. 80, § 2, effective July 1, 2015; 2021, ch. 77, § 2, effective August 1, 2021.

6-01-04.5. Investigation of bank holding companies.

The department may investigate a bank holding company that owns or controls a North Dakota state chartered financial institution upon the commissioner’s receipt of information material to the safety and soundness of the bank holding company, and may pursue and impose penalties under sections 6-01-04.1, 6-01-04.2, and 6-01-04.3 against such a bank holding company.

History. S.L. 2015, ch. 80, § 3, effective July 1, 2015.

6-01-05. Taking of testimony and enforcement of orders.

The state banking board, the state credit union board, the commissioner, and the deputy examiners each have the power to subpoena witnesses, administer oaths, and generally to do and perform any and all acts and things necessary to the complete performance of the powers and duties imposed upon them in this title, and to enforce the provisions of law relating to financial corporations, financial institutions, and credit unions. For the purpose of enabling them to perform all the duties imposed upon them, the provisions of section 27-10-23 are applicable to their proceedings. Any and all orders made by the issuing board or commissioner are operative immediately and remain in full force until modified, amended, or annulled by the issuing board, commissioner, or by a court of competent jurisdiction in an action commenced by the party against whom such order has been issued.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 3; C.L. 1913, § 5146, subs. 3; S.L. 1931, ch. 96, § 1, subs. c; 1933, ch. 71, § 3; R.C. 1943, § 6-0105; 2013, ch. 77, § 5.

Cross-References.

Administrative Agencies Practice Act, appeal, see § 28-32-42 et seq.

Notes to Decisions

Order of Commissioner.

Where there has been no hearing before the board and no directive of the board has been made at a regularly assembled meeting, an order by the commissioner finding a bank insolvent and directing it to cease banking operations was not an order of the banking board, despite the recital that the board had approved the commissioner’s report. First Am. Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 1972 N.D. LEXIS 149, 1972 N.D. LEXIS 177 (N.D. 1972).

Standing.

Bank which received notice from state banking board of hearing on relocation of another bank, participated in hearing, and was factually aggrieved by decision of agency had standing to take appeal. Citizens State Bank v. Bank of Hamilton, 238 N.W.2d 655, 1976 N.D. LEXIS 196 (N.D. 1976).

DECISIONS UNDER PRIOR LAW

Appeal from Orders of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 161 N.W. 797, 1916 N.D. LEXIS 173 (N.D. 1917).

Private Citizen.

The state examiner cannot compel private citizen to testify before him as to business transaction with state hospital while examining its financial condition. In re Camp, 7 N.D. 69, 72 N.W. 912, 1897 N.D. LEXIS 42 (N.D. 1897).

Review on Appeal.

Decisions of state banking board were held to be subject to review on appeal since this section provided for review and thus satisfied the former requirement of section 28-32-01 that, for a decision to be by an administrative agency, it must be one “which by statute is subject to review in the courts.” In re Bank of Rhame, 231 N.W.2d 801, 1975 N.D. LEXIS 169 (N.D. 1975).

Collateral References.

Power of administrative agency, in investigation of nonjudicial nature, to issue subpoenas against persons not subject to agency’s regulatory jurisdiction, 27 A.L.R.2d 1208.

6-01-06. Appointment of receivers.

The state banking board and state credit union board, except as otherwise provided in this title, have authority and power to appoint, by their own order, receivers for insolvent financial institutions and credit unions under their regulatory supervision. Such receivers have the same power and authority, and their acts have the same validity, as if they had been appointed under and by the direction of a district court. Nothing herein contained may be construed so as to take away from the courts the power to appoint receivers of such financial institutions and credit unions at any stage of the proceedings and thus to terminate the receivership ordered by the board.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 3; C.L. 1913, § 5146, subs. 3; S.L. 1931, ch. 96, § 1, subs. c; 1933, ch. 71, § 3; R.C. 1943, § 6-0106; 2013, ch. 77, § 6.

Notes to Decisions

Appeal from Orders of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 160 N.W. 705, 1916 N.D. LEXIS 173 (N.D. 1916).

Temporary Receiver.

Under ch. 53, Laws 1915, the state banking board had no authority, during the absence of the state examiner from the state, and without his initiative action, knowledge or consent, or that of the acting state examiner, to determine a bank to be insolvent, to cause it to be closed, and to place its temporary receiver in charge thereof. State ex rel. Lofthus v. Langer, 46 N.D. 462, 177 N.W. 408, 1920 N.D. LEXIS 10 (N.D. 1920).

Collateral References.

Bank’s right to set off unmatured claims as against receiver, assignee for benefit of creditors, or trustee in bankruptcy, of insolvent depositor, 37 A.L.R.2d 850.

6-01-07. Records of state banking board, state credit union board, and commissioner.

The state banking board and state credit union board shall keep a full and complete record of all their proceedings and of all orders made by them. The records and the proceedings of the boards and commissioner are open in accordance with sections 44-04-18 and 44-04-19. All reports, except supervisory reports of examination, made by or filed with the board or the commissioner relating to any financial institution, must be open to inspection and examination by stockholders, shareholders, depositors, creditors, and sureties on any bonds of any such institution or on the bonds of any officer or employee thereof, subject, however, to the following restrictions:

  1. A stockholder, shareholder, depositor, creditor, or surety of any institution desiring to inspect the information specified above of any institution shall make a written request for the inspection.
  2. A written request must:
    1. Specify the information to which access is requested; and
    2. Give the reasons for the request.
  3. Upon written request, the commissioner, or any person designated in writing by the commissioner, may disclose information specified in subsection 1 of section 6-01-07.1 only upon determining and to the extent that good cause exists for the disclosure.
  4. Either prior to or at the time of any disclosure, the commissioner or designee shall impose such terms and conditions as the commissioner deems necessary to protect the confidential nature of the information, the financial integrity of the financial institution to which the information relates, and the legitimate privacy interests of any individual named in the information.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 3; C.L. 1913, § 5146, subs. 3; S.L. 1931, ch. 96, § 1, subs. c; 1933, ch. 71, § 3; R.C. 1943, § 6-0107; S.L. 1945, ch. 143, § 4; 1957 Supp., § 6-0107; S.L. 1979, ch. 115, § 1; 1997, ch. 79, § 2.

Notes to Decisions

Appeal from Orders of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 161 N.W. 797, 1916 N.D. LEXIS 173 (N.D. 1917).

6-01-07.1. Records — Confidential.

  1. All facts and information obtained or created by the commissioner or the department in the following ways are confidential, except as provided in subsections 2 through 8:
    1. In the course of examining financial institutions, credit unions, and other licensed entities under the supervision of the commissioner, or in the course of receiving audit reports, reports of examining committee and reports of annual meetings of stockholders and directors of such institutions and licensees. The reports of examination may be made available to the financial institution’s or licensee’s board of directors, or the board’s specifically authorized agents or representatives, but the reports remain the property of the department.
    2. From the federal reserve system, federal deposit insurance corporation, federal home loan bank board, national credit union administration, or any state bank or credit union supervisors or supervisors of other licensed entities of other states.
    3. In the course of investigating an institution under the supervision of, or licensed by, the commissioner, until such investigation is complete.
    4. In the course of a special investigation being carried out at the request of the governor or any court.
      1. In the form or nature of an application for a charter, license, or permission which meets any of the following criteria:
        1. Trade secrets and commercial or financial information.
        2. Personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
        3. Information contained in the application form which is in the nature of examination report information.
      2. Determination of what required application information falls within each category must be made by the body before which the application is brought.
    5. In the form of a complaint or comment from the public regarding a financial institution, credit union, or other licensed entity under the supervision of the commissioner, unless the commissioner is providing aggregate, nonspecific information.
  2. When the commissioner is required or permitted by law to report upon or take special action regarding the affairs of any institution or licensed entity under the commissioner’s supervision, the commissioner shall divulge only such information specified in subsection 1 as is necessary and sufficient for the action taken or to be taken.
  3. The commissioner may furnish information to the attorney general, other state agencies, any prosecuting officials requiring the information for use in pursuit of official duties, and legislative investigations under chapter 54-03.2, if the commissioner determines necessary or proper to the enforcement of federal laws or the laws of this state or in the best interest of the public. Information furnished by the commissioner to any third party which is confidential in the commissioner’s possession remains confidential in the possession of the third party. Information received by the commissioner from any third party which is confidential in the third party’s possession remains confidential in the commissioner’s possession.
  4. The commissioner may furnish information and enter sharing agreements as to matters of mutual interest to an official or examiner of the federal reserve system, federal deposit insurance corporation, federal home loan bank board, national credit union administration, office of thrift supervision, comptroller of the currency, any other federal government agency, insurance commissioner, office of the securities commissioner, regulatory trade associations, any state bank or credit union supervisors or supervisors of other licensed entities of other states, or a nationwide multistate licensing system.
  5. Information regarding complaints or comments from the public may be provided to other regulatory agencies, to the individual in response to the complaint or comment, or to the subject financial institution, credit union, or other licensed entity under the supervision of the commissioner.
  6. The commissioner shall not be required to disclose the name of any debtor of any financial institution, credit union, or licensed entity reporting to or under the supervision of the commissioner or anything relative to the private accounts, ownership, or transactions of any such institution, or any fact obtained in the course of any examination thereof, except as herein provided. All disclosures must be limited to only those documents directly relevant to the inquiry at issue.
  7. This section does not limit the right of access of stockholders, shareholders, depositors, creditors, and sureties on bonds to specified department records as, and to the extent, provided by section 6-01-07.
  8. The standards for confidentiality and disclosure by the commissioner set forth in this section, except the standard of the exercise of discretion, which shall only be exercised by the commissioner, apply equally to the state banking board, the state credit union board, and all department employees.

Source: S.L. 1979, ch. 116, § 1; 1989, ch. 98, § 1; 1991, ch. 81, § 1; 1997, ch. 80, § 1; 2001, ch. 89, § 1; 2005, ch. 80, § 1; 2007, ch. 80, § 2; 2013, ch. 115, § 1; 2021, ch. 78, § 1, effective August 1, 2021.

6-01-08. Appointment of commissioner — Qualifications.

The commissioner must be appointed by the governor and confirmed by the senate, and shall hold office for a term of four years and until a successor has been appointed, confirmed by the senate, and has qualified, unless the commissioner is removed sooner as herein provided. If the senate is not in session, the governor may make an interim appointment, and the interim appointee shall hold office until the senate confirms or rejects the appointment. The commissioner’s term of office commences on the first day of July in each year next following a national presidential election. The commissioner must be a skilled accountant, and may not be an incumbent of any other public office in the state, or in any county, municipality, or public institution thereof, and may not own, hold, or control any stocks, capital, or bonds, or hold the office of trustee, assignee, officer, agent, or employee of any financial institution under the commissioner’s jurisdiction, or of any corporation engaged in the business of guarantying or ensuring the fidelity or faithful performance of the duties or the solvency of public officers or of public depositaries. The governor may remove from office any commissioner who violates or fails to discharge faithfully the duties of office or who becomes disqualified under the provisions of this section.

Source: S.L. 1893, ch. 95, § 1; R.C. 1895, § 136; R.C. 1899, § 136; S.L. 1901, ch. 170, § 1; R.C. 1905, § 140; S.L. 1907, ch. 230, § 1; C.L. 1913, § 224; S.L. 1927, ch. 260, § 1; 1933, ch. 71, § 4; R.C. 1943, § 6-0108; S.L. 1993, ch. 68, § 1.

6-01-09. Supervision and examination by commissioner of financial institutions.

The commissioner shall exercise a constant supervision over the business affairs of all financial corporations, financial institutions, and credit unions, including all out-of-state branches of financial corporations, financial institutions, and credit unions. Either the commissioner or one or more examiners shall examine each financial institution to assess the affairs of the institution and ascertain the institution’s financial condition. The commissioner shall inspect and verify the assets and liabilities of the institution and branches to ascertain with reasonable certainty that the value of the assets and the amounts of the liabilities are correctly carried on its books. The commissioner shall examine the validity of mortgages held by savings institutions and shall see that all of the mortgages are properly recorded. The commissioner shall investigate the method of operation and conduct of the corporations and institutions and their systems of accounting to ascertain whether the methods conform to the law and sound banking usage and principles. The commissioner shall inquire into and report any infringement of the laws governing those corporations and institutions, and for that purpose the commissioner may examine the officers, agents, and employees of the corporations and institutions and all persons doing business therewith. The commissioner may examine, or cause to be examined, or review the books and records of any subsidiary corporation of a bank or credit union service organization of a credit union under the commissioner’s supervision and may require the bank to provide information on the holding company that owns the bank. The commissioner may also examine, or cause to be examined, or review the books and records of any technology service provider that provides services to financial corporations, credit unions, and financial institutions under the commissioner’s supervision, to evaluate that entity’s risk management systems and controls and compliance with applicable laws that affect such services provided to financial corporations, credit unions, and financial institutions. The commissioner shall report the condition of the corporations and institutions, together with the commissioner’s recommendations or suggestions in connection therewith, to the state banking board, state credit union board, or both, and the boards may take such action as the exigencies may demand.

Source: S.L. 1893, ch. 95, § 6; R.C. 1895, § 141; R.C. 1899, § 141; S.L. 1901, ch. 170, § 2; 1905, ch. 165, § 1; R.C. 1905, §§ 145, 4635; S.L. 1911, ch. 55, § 1, subs. 4; C.L. 1913, §§ 229, 5146, subs. 4; S.L. 1931, ch. 96, § 2, subs. a; 1933, ch. 71, §§ 5, 19; 1943, ch. 91, § 2; R.C. 1943, § 6-0109; S.L. 1977, ch. 66, § 1; 1979, ch. 117, § 1; 1985, ch. 115, § 1; 1993, ch. 69, § 1; 1995, ch. 79, § 2; 2007, ch. 80, § 3; 2013, ch. 77, § 7; 2015, ch. 80, § 4, effective July 1, 2015; 2019, ch. 123, § 1, effective July 1, 2019; 2021, ch. 76, § 3, effective April 13, 2021.

Cross-References.

Duties of commissioner in relation to credit unions, see §§ 6-06-02, 6-06-08, 6-06.1-01, 6-06.1-04, 6-06.1-05, 6-06.1-07, 6-06.1-09 to 6-06.1-12.

Examination and supervision of annuity, safe deposit, surety, and trust companies, see §§ 6-05-27 to 6-05-29.

Notes to Decisions

Appeal from Orders of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 160 N.W. 705, 1916 N.D. LEXIS 173 (N.D. 1916).

Jurisdiction of State Banking Board.

Corporation organized under N.D.C.C. ch. 6-05 (annuity, safe deposit, surety and trust companies) is within jurisdiction of state banking board and subject to this section notwithstanding the fact that this section is not mentioned in N.D.C.C. § 6-05-34 which is entitled “Other code provisions applicable to corporations doing business under this chapter”. First Am. Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 1972 N.D. LEXIS 149, 1972 N.D. LEXIS 177 (N.D. 1972).

6-01-10. Commissioner to keep records and make reports — Biennial report.

  1. The assistant commissioner shall act as secretary and keep all proper records and files pertaining to the duties and work of the department of financial institutions and the proceedings of the board. The commissioner shall report to the board annually, touching on all the commissioner’s official acts and those of the deputy examiners, giving abstracts of statistics and of the conditions of the various institutions to which the commissioner’s duties relate, and making such recommendations and suggestions as the commissioner may determine proper.
  2. The state banking board shall submit a biennial report to the governor and the secretary of state in accordance with section 54-06-04. In addition to any requirements established pursuant to section 54-06-04, the banking board’s report must include a summary or abstract of the reports of the commissioner.
  3. The commissioner shall report to the state credit union board annually in the same manner as this section provides for the commissioner’s report to the state banking board. The state credit union board shall submit a biennial report to the governor and the secretary of state in accordance with section 54-06-04, and in addition, the credit union board’s report must include a summary or abstract of the reports of the commissioner.
  4. The biennial reports of the state banking board and the state credit union board shall be published in the form of a combined biennial report of the department of financial institutions. The biennial report of the department shall be submitted to the governor and the secretary of state in accordance with section 54-06-04. The biennial report of the department must include all other biennial reports which the commissioner or the boards are required by law to submit to the governor and the office of management and budget.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 5; C.L. 1913, § 5146, subs. 5; S.L. 1931, ch. 96, § 2, subs. b; 1933, ch. 71, § 6; 1943, ch. 91, § 3; R.C. 1943, § 6-0110; S.L. 1963, ch. 346, § 12; 1973, ch. 403, § 7; 1975, ch. 466, § 7; 1979, ch. 118, § 1; 1995, ch. 350, § 5; 2001, ch. 88, § 7; 2013, ch. 77, § 8.

Notes to Decisions

Appeal from Order of State Banking Board.

An order of the state banking board requesting the removal of objectionable securities is appealable. Youmans v. Hanna, 35 N.D. 479, 160 N.W. 705, 1916 N.D. LEXIS 173 (N.D. 1916).

6-01-11. Salary of commissioner.

The salary of the commissioner must be within the amount appropriated for salaries by the legislative assembly. The commissioner is allowed, in addition to the commissioner’s salary, the commissioner’s necessary and actual expenses incurred in the discharge of the commissioner’s official duties. The commissioner’s salary and expenses must be audited and paid in the manner in which the salary and expenses of other state officers are paid.

Source: S.L. 1893, ch. 95, § 10; R.C. 1895, § 145; R.C. 1899, § 145; S.L. 1901, ch. 170, § 3; 1905, ch. 170, § 1; R.C. 1905, § 150; S.L. 1909, ch. 215, § 1; C.L. 1913, § 234; S.L. 1927, ch. 259, § 1; 1933, ch. 71, § 8; 1933, ch. 196, § 1; 1943, ch. 91, § 4; R.C. 1943, § 6-0111; S.L. 1949, ch. 314, § 2; 1957 Supp., § 6-0111; S.L. 1981, ch. 535, § 1.

6-01-12. Bonds of commissioner and deputies. [Repealed]

Repealed by S.L. 1999, ch. 113, § 24.

6-01-13. Commissioner — Appointment of assistant commissioner and assignment of titles within the department.

The commissioner may appoint, remove, and assign appropriate titles to such deputy examiners and such other employees as in the commissioner’s judgment may be necessary for the proper discharge of the business of the department of financial institutions. The commissioner may select and designate one of said deputy examiners to be the assistant commissioner to act during the absence or disability of the commissioner, and in such cases the assistant commissioner so designated has charge of the office and shall administer its affairs. The assistant commissioner shall perform such duties as may be prescribed by the commissioner.

Source: S.L. 1893, ch. 95, § 10; R.C. 1895, § 145; R.C. 1899, § 145; S.L. 1901, ch. 170, § 3; 1905, ch. 165, § 1; 1905, ch. 170, § 1; R.C. 1905, §§ 150, 4635; S.L. 1909, ch. 215, § 1; 1911, ch. 55, § 1, subs. 6; C.L. 1913, §§ 234, 5146, subs. 6; S.L. 1917, ch. 219, § 1; 1925 Supp., § 5146, subs. 6; S.L. 1927, ch. 259, § 1; 1931, ch. 96, § 3, subs. a; 1933, ch. 71, § 10; 1943, ch. 91, § 6; R.C. 1943, § 6-0113; S.L. 1969, ch. 99, § 1; 2001, ch. 88, § 8; 2013, ch. 77, § 9.

Notes to Decisions

Injunction.

An injunction cannot be granted to prevent one who is acting as deputy examiner, with the consent of the public examiner, from performing the duties incident to such office where no specific injury is alleged. State ex rel. Langer v. Lofthus, 45 N.D. 357, 177 N.W. 755, 1920 N.D. LEXIS 130 (N.D. 1920).

6-01-14. Deputies controlled by commissioner — Reports.

Each deputy examiner provided for in this title is under the direct orders and instructions of the commissioner, and shall report to the commissioner during or immediately after the completion of each examination of each financial corporation, financial institution, or credit union examined by the deputy examiner, together with such recommendations and suggestions as the deputy examiner may deem advisable. Such report must be in such form as may be prescribed by the commissioner, the state banking board, or state credit union board.

Source: S.L. 1893, ch. 95, § 10; R.C. 1895, § 145; R.C. 1899, § 145; S.L. 1901, ch. 170, § 3; 1905, ch. 165, § 1; 1905, ch. 170, § 1; R.C. 1905, §§ 150, 4635; S.L. 1909, ch. 215, § 1; 1911, ch. 55, § 1, subs. 8; C.L. 1913, §§ 234, 5146, subs. 8; S.L. 1917, ch. 219, § 1; 1927, ch. 259, § 1; 1931, ch. 96, § 3, subs. b; 1933, ch. 71, § 11; R.C. 1943, § 6-0114; 2013, ch. 77, § 10.

6-01-15. Officers and employees to be disinterested.

  1. No officer or employee of this department may have any interest, directly or indirectly, in any financial corporation or financial institution within the jurisdiction of the department of financial institutions, nor in any corporation or institution engaged wholly or in part in the writing or issuing of bonds of or for any such corporation or institution or any officer or employee thereof. Provided, however, this prohibition does not apply to membership in a state-chartered credit union or savings and loan association.
  2. For purposes of this section, “interest” means ownership of or investment in such corporations or institutions.

Source: S.L. 1905, ch. 165, § 1; R.C. 1905, § 4635; S.L. 1911, ch. 55, § 1, subs. 7; C.L. 1913, § 5146, subs. 7; S.L. 1917, ch. 219, § 2; 1925 Supp., § 5146, subs. 7; S.L. 1931, ch. 96, § 3, subs. c; 1933, ch. 71, § 12; R.C. 1943, § 6-0115; S.L. 1979, ch. 119, § 1; 2001, ch. 88, § 9; 2013, ch. 77, § 11.

6-01-16. Salaries of commissioner’s deputies.

The salary of the assistant commissioner and the salary of each other deputy must be fixed by the commissioner within the limits of the legislative appropriation for such salaries. In addition to the amounts herein specified, each deputy must be allowed the deputy’s actual and necessary traveling expenses when engaged in the discharge of the deputy’s duties. The salaries of all clerks, stenographers, and other assistants must be fixed by the commissioner within the limits of the legislative appropriation therefor.

Source: S.L. 1893, ch. 95, § 10; R.C. 1895, § 145; R.C. 1899, § 145; S.L. 1901, ch. 170, § 3; 1905, ch. 165, § 1; 1905, ch. 170, § 1; R.C. 1905, §§ 150, 4635; S.L. 1909, ch. 215, § 1; 1911, ch. 55, § 1, subs. 9; C.L. 1913, §§ 234, 5146, subs. 9; S.L. 1917, ch. 219, § 3; 1925 Supp., § 5146, subs. 10; S.L. 1927, ch. 259, § 2; 1931, ch. 96, § 3, subs. d; 1933, ch. 71, § 13; 1943, ch. 91, § 7; R.C. 1943, § 6-0116; S.L. 1945, ch. 264, § 2; 1949, ch. 314, § 3; 1957 Supp., § 6-0116; 2013, ch. 77, § 12.

6-01-17. Semiannual assessments of banks and interstate branches.

Every state banking association and banking institution under the jurisdiction and control of the commissioner and the commissioner’s deputy examiners by this title, including the Bank of North Dakota and every branch of an out-of-state state bank, shall pay a semiannual assessment. This assessment is to be determined by the state banking board as necessary to fund that portion of the department’s budget relating to the regulation of state-chartered banks and branches of out-of-state state banks, including the authority to enter cooperative fee sharing agreements and assessment of associated travel costs with other state bank supervisors. Fees for the examination of a trust department must be computed in accordance with section 6-05-28. The assessment must be paid to the department of financial institutions within thirty days of each June thirtieth and December thirty-first. If any such corporation or institution or branch is delinquent more than twenty days in making such payment, the board may seek other administrative remedies of such delinquent corporation, institution, or branch until payment of the amount due. The commissioner may assess a penalty of one percent of the outstanding assessment fee for each day that the assessment fee is delinquent. All fees and penalties under this section must be deposited with the state treasurer and deposited in the financial institutions regulatory fund.

Source: S.L. 1890, ch. 23, § 29; 1893, ch. 27, § 29; R.C. 1895, § 3254; S.L. 1897, ch. 31; R.C. 1899, § 3254; S.L. 1901, ch. 94, § 1; 1905, ch. 165, § 30; R.C. 1905, § 4664; S.L. 1911, ch. 55, § 4; S.L. 1915, ch. 55, § 4; C.L. 1913, § 5179; S.L. 1915, ch. 55, § 1; 1921, ch. 22, § 1; 1925 Supp., § 5179; S.L. 1931, ch. 96, § 4; 1943, ch. 88, § 2; R.C. 1943, § 6-0117; S.L. 1953, ch. 94, § 1; 1957 Supp., § 6-0117; S.L. 1965, ch. 82, § 1; 1967, ch. 82, § 1; 1971, ch. 102, § 1; 1979, ch. 120, § 1; 1983, ch. 110, § 1; 1987, ch. 10, § 4; 1987, ch. 120, § 2; 1989, ch. 96, § 2; 1995, ch. 79, § 3; 2011, ch. 75, § 1; 2021, ch. 76, § 4, effective April 13, 2021.

6-01-17.1. Application fees — Cost of transcript.

The following fees must accompany an application presented to the state banking board, state credit union board, or commissioner and must be paid by the commissioner into the financial institutions regulatory fund:

  1. For a certificate of authority to organize a banking association, a fee of five thousand dollars, paid by the applicants.
  2. A banking association’s application for authority to remove its business to some place within the state other than the town in which it is presently located and to change its name, a fee of two thousand five hundred dollars.
  3. National bank conversion to a state bank, a fee of two thousand five hundred dollars.
  4. Application by two or more banks to merge or consolidate, a fee of one thousand five hundred dollars.
  5. Application by a person to sell, dispose, or purchase an association, banking institution, or holding company, a fee of five hundred dollars unless a hearing is held before the board in which case the fee is two thousand dollars.
  6. A banking association’s application to establish and operate a separate facility, a fee of one thousand five hundred dollars. A banking institution that discontinues a facility established for the purpose of providing educational opportunities to a high school is entitled to a refund of any application fee paid.
  7. A banking association’s application to establish customer electronic funds transfer centers, a fee not to exceed five hundred dollars.
  8. For a certificate of authority to organize an annuity, safe deposit, surety, or trust company, a fee of five thousand dollars.
  9. A banking association’s application for authority to exercise trust powers, a fee of one thousand five hundred dollars.
  10. Application to organize a credit union, a fee of three hundred dollars, paid by the applicants.
  11. Application for a credit union to establish a branch, a fee of three hundred dollars.
  12. Application by a credit union to expand its field of membership, a fee of one hundred fifty dollars.
  13. Application by a federal credit union to convert to a state credit union, a fee of three hundred dollars.
  14. For a certificate of authority to organize a savings and loan association, a fee of five thousand dollars.
  15. A savings and loan association’s application to establish and operate a branch office, a fee of one thousand five hundred dollars.
  16. A trust company’s application or notification to establish an operating subsidiary or branch office, a fee of five hundred dollars.
  17. Application by two or more credit unions to merge, a fee of three hundred dollars.

The commissioner may cause a certified transcript to be prepared for any hearing conducted on an application. The costs for the original and up to six copies of the transcript must be paid by the applicant.

Source: S.L. 1979, ch. 121, § 1; 1989, ch. 96, § 3; 1991, ch. 81, § 2; 1995, ch. 79, § 4; 1995, ch. 80, § 1; 2001, ch. 168, § 1; 2005, ch. 86, § 2.

6-01-17.2. Additional assessment of banks and interstate branches.

If the commissioner determines that more than one visit, inspection, or examination is necessary to promote the safety and soundness of a state banking association or a branch of an out-of-state state bank during a twelve-month period, the state banking association or branch shall pay to the state treasurer a fee for the time used by the commissioner or other person designated by the commissioner in supervising, filing, and corresponding in connection with each additional visit, inspection, or examination and report of examination and for time used by each deputy examiner, or other person in making and otherwise preparing and typing the reports of examination herein provided for. Fees for the visit, inspection, or examination must be charged by the department of financial institutions at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the visit, inspection, or examination provided for by this section. A state banking association or branch of an out-of-state state bank shall pay such assessment or fee within ten days of receiving a billing from the commissioner. Fees must be deposited in the financial institutions regulatory fund. The state treasurer shall report the payments of fees to the commissioner, and if any corporation or institution or branch is delinquent more than twenty days in making the payment, the board may make an order suspending the functions of the delinquent corporation or institution or branch until payment of the amount due. The commissioner may assess a penalty of five dollars a day additional for the delay. The state banking board may waive or postpone the collection of this special assessment if the assessment would place an undue burden on the state banking association or branch.

Source: S.L. 1983, ch. 110, § 2; 1989, ch. 96, § 4; 1995, ch. 79, § 5; 2001, ch. 88, § 10.

6-01-18. Reports and examinations of institutions by federal deposit insurance corporation, other state supervisors, or federal reserve system.

The commissioner may accept, in lieu of any examination authorized or required by this title to be conducted by the department of any banking institution, the examination that may have been made of the institution within a reasonable period by the federal deposit insurance corporation, any other state supervisor, or the federal reserve system, if a copy of the examination is furnished to the commissioner. The commissioner also may accept any report relative to the condition of any banking institution which may have been obtained by that corporation or system within a reasonable period in lieu of any similar report that the commissioner is authorized by this title to require of the institution, if a copy of the report is furnished to the commissioner. The commissioner may furnish to the corporation or system, or to any official or examiner, a copy or copies of any or all examinations made of any banking institutions and of any or all reports made by them, and may give access to and disclose to the corporation or system, or any official or examiner, any and all information possessed by the office of the commissioner with reference to the conditions or affairs of any institution insured with the federal deposit insurance corporation. This section does not limit the duty of any banking institution in this state, the deposits of which are to any extent insured under the provisions of the federal Act creating the federal deposit insurance corporation, or of any amendment of or substitution for that Act, to comply with the provisions of that Act, its amendments or substitutions, or the requirements of the corporation relative to examinations and reports, nor limit the powers of the commissioner with reference to examinations and reports under this title.

Source: S.L. 1935, ch. 95, § 5; R.C. 1943, § 6-0118; S.L. 1979, ch. 122, § 1; 1995, ch. 79, § 6.

6-01-19. Commissioner to keep bank record.

The commissioner shall keep a bank record wherein must be recorded the name and location of each bank in the state, its capitalization and changes thereof, its officers, its shareholders and addresses thereof, and its reserve agents, and changes of the same, and the commissioner shall keep in docket form such other proceedings as may have been had relative to such bank by the state banking board and by the commissioner.

Source: S.L. 1905, ch. 165, § 41; R.C. 1905, § 4675; C.L. 1913, § 5190; S.L. 1931, ch. 96, § 5; R.C. 1943, § 6-0119.

6-01-20. Bank of North Dakota entitled to records. [Repealed]

Repealed by S.L. 1997, ch. 80, § 2.

6-01-21. State agencies — Examinations — Fees. [Repealed]

Repealed by S.L. 1959, ch. 372, § 117.

6-01-21.1. County agencies — Examinations — Fees. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-21.2. Municipal agencies, park boards, school districts — Examinations — Fees — Alternative audits. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-21.3. Examination of municipal agencies and school districts by order of governor or upon petition. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-21.4. Examination in case of irregularity or embezzlement. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-22. Examination of counties. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-23. Examinations of county treasurers. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-24. Supervision of records and fiscal affairs of counties. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-25. Supervision of books and accounts of public institutions and private institutions with which state has dealings.

The commissioner shall assume and exercise constant supervision over the books and financial accounts of the several public offices and institutions which the commissioner is authorized to examine. The commissioner shall prescribe and enforce a correct and uniform method of keeping financial accounts in such offices and institutions, shall recommend a form for warrants or for order-checks which must conform so far as consistent with statutory and charter requirements to approved banking practice, in order to facilitate handling of such instruments by banks and other depositories, and shall instruct the proper officer of each of said institutions in the due performance of the officer’s duties concerning the same. The commissioner has authority to examine the books and accounts of all private institutions with which the state has any dealings so far only as the same relate to such dealings. If any public officer having control of any such office or institutions fails or refuses to comply with the directions of the commissioner, the commissioner shall report the facts to the governor and to the manager of the state bonding fund, and such refusal constitutes grounds for removal from office and cancellation of the bond of such officer.

Source: S.L. 1893, ch. 95, § 3; R.C. 1895, § 138; R.C. 1899, § 138; R.C. 1905, § 142; C.L. 1913, § 226; S.L. 1933, ch. 71, § 16; 1943, ch. 91, § 9; R.C. 1943, § 6-0125; S.L. 1955, ch. 98, § 1; 1957 Supp., § 6-0125; S.L. 1967, ch. 376, § 1.

Cross-References.

Audit of claims against state bonding fund, see § 26.1-21-13.

6-01-26. Special state examiner. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-27. Duty of state examiner on failures by officers. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-28. Public and private officers to aid examiner — Examiner’s authority on investigation. [Repealed]

Repealed by S.L. 1967, ch. 376, § 63.

6-01-29. Obstructing or misleading examiner — Penalty.

Every person who, when required to do so, shall refuse or neglect to make any return or exhibit, or to make or give any information required by the examiner, or who willfully shall obstruct or mislead the examiner in the execution of the examiner’s duties, or who in any manner shall hinder a thorough examination by the examiner, shall be guilty of a class C felony.

Source: S.L. 1893, ch. 95, §§ 7, 8; R.C. 1895, §§ 142, 143; R.C. 1899, §§ 142, 143; R.C. 1905, §§ 146, 147; C.L. 1913, §§ 230, 231; S.L. 1933, ch. 71, §§ 20, 21; R.C. 1943, § 6-0129; S.L. 1975, ch. 106, § 40.

6-01-30. Reports of commissioner — Contents.

The commissioner shall report to the governor the result of the commissioner’s examination of any public office or state institution and also shall make a report on any particular matter connected therewith at any time when required to do so by the governor.

Source: S.L. 1893, ch. 95, § 9; R.C. 1895, § 144; R.C. 1899, § 144; R.C. 1905, § 148; C.L. 1913, § 232; S.L. 1933, ch. 71, § 22; 1943, ch. 91, § 10; R.C. 1943, § 6-0130.

6-01-31. Certain accounts open for inspection.

Any person acquiring custody of, or receiving any funds for or on behalf of the state of North Dakota, or any of its political subdivisions, who places such funds in an account with any financial institution, banking association, or banking institution, or who commingles such funds with any private account, has waived all privilege of privacy or confidentiality on such accounts for the purposes of permitting an audit, examination, or inspection by the state auditor, commissioner of financial institutions, or the attorney general, as hereinafter provided.

Upon application and a reasonable showing by either the state auditor, the commissioner of financial institutions, or the attorney general that any account, private or otherwise, in any banking association, financial institution, or banking institution, contains funds belonging to the state of North Dakota or a political subdivision, whether or not commingled with private funds, the district court may issue its order making such accounts available for examination, audit, or inspection by the state auditor, the commissioner of financial institutions, or the attorney general. No financial institution, banking association, or banking institution is subject to damages for giving information on, or making such account available for inspection, audit, or examination pursuant to this section.

In addition to any other presumptions, any check, draft, or other comparable instrument is presumed to represent public funds of the state, or a political subdivision, as the case may be, if it is payable to a person identified as an official of the state or a political subdivision.

Source: S.L. 1975, ch. 67, § 1.

6-01-32. Liability of bank officers and directors.

No claim or action seeking to recover money damages may be brought by the federal deposit insurance corporation, resolution trust corporation, or other federal banking regulatory agency against any director or officer, including any former director or officer, of any insured financial depository institution unless the claim or action arises out of the gross negligence, or willful or intentional misconduct of the officer or director during the term of office with the insured financial institution.

Source: S.L. 1995, ch. 81, § 1.

CHAPTER 6-02 Organization and Qualification of Banks

6-02-01. Compliance with chapters required — Penalty for noncompliance.

  1. No person, firm, company, copartnership, or corporation, either domestic or foreign, not organized under this chapter or authorized to take on banking powers under this section, except national banking corporations, banks organized under the laws of another state, domestic or foreign bank holding companies, their affiliates, bona fide financial institution trade associations and their affiliates, and the Bank of North Dakota, may make use of or display in connection with its business, in signs, letterheads, advertising, or in any other way, such words as “bank”, “banker”, or “banking”, or any other word or words of like import, nor may any person or concern do or perform anything in the nature of the business of a bank until and unless such business is regularly organized or authorized under this chapter. Upon written request, the commissioner may grant an exemption to this section if the commissioner finds that use of the words “bank”, “banker”, or “banking”, or words of like import, are not reasonably likely to cause confusion or lead the public to believe that the person requesting the exemption is a bank, holding company, trade association, or affiliate authorized under this section or is conducting a business subject to the jurisdiction of the department. In granting an exemption under this section, the commissioner may restrict or condition the exemption and use of the name or word or the activities of an exempt person as the commissioner considers appropriate to protect the public interest.
  2. If any firm or corporation organized prior to July 1, 1931, has been granted a charter permitting it to use any word, words, or title contrary to the intent of this section, and by reason of its rights under such charter this section may not be enforced against it during the life of such charter, no renewal charter may be granted to such person, firm, or corporation permitting the continuance of the use of such word, words, or title contrary to or in violation of this section. Any person, firm, or corporation which, by reason of an existing charter right under any law or statute in effect prior to July 1, 1931, may be held by the courts not to be affected by this section and which therefore refuses to comply with this section, during the period of noncompliance, shall prominently and continuously display in plain, legible, and clearly discernible lettering on all of its signs, stationery, circulars, and advertising, and in all of its printed or written matter, the following words and language: “NOT UNDER THE SUPERVISION OF THE STATE BANKING BOARD OR THE COMMISSIONER OF FINANCIAL INSTITUTIONS”. Such language must be displayed as prominently thereon as is other matter therein.
  3. Any person, firm, company, copartnership, or corporation, domestic or foreign, violating any provision of this section shall forfeit to the state one hundred dollars for every day or part thereof during which such violation continues. In an action brought by the commissioner or any aggrieved person, the court may issue an injunction restraining any such person, firm, company, copartnership, or corporation from further using such words, terms, or phrases in violation of this section or from further transacting business in such way or manner as to lead the public to believe that its business is in whole or in part of the nature of a bank, or that it is under the supervision of the state banking board or the commissioner.

Source: S.L. 1890, ch. 23, § 27; 1893, ch. 27, § 27; R.C. 1895, § 3252; R.C. 1899, § 3252; S.L. 1905, ch. 165, § 28; R.C. 1905, § 4662; C.L. 1913, § 5177; S.L. 1931, ch. 96, § 7; R.C. 1943, § 6-0201; S.L. 1963, ch. 93, § 2; 1965, ch. 84, § 1; 1967, ch. 85, § 1; 1977, ch. 64, § 3; 1991, ch. 82, § 1; 2001, ch. 88, § 11; 2005, ch. 81, § 1; 2007, ch. 81, § 1.

Notes to Decisions

Constitutionality.

This section does not violate section 1 of article 1 or section 61 of the state constitution. State ex rel. Goodsill v. Woodmanse, 1 N.D. 246, 46 N.W. 970, 1890 N.D. LEXIS 31 (N.D. 1890).

Police Power.

The matter of regulating banking not expressly authorized by law is strictly within the legislative discretion under that branch of the police power relating to the public safety. State ex rel. Goodsill v. Woodmanse, 1 N.D. 246, 46 N.W. 970, 1890 N.D. LEXIS 31 (N.D. 1890).

Trust Companies.

A trust company that engages in general banking without first complying with the requirements of N.D.C.C. chs. 6-02 and 6-03, and without receiving a charter to engage in commercial banking, is declared to be engaged in an ultra vires activity, and such activity may be enjoined if an injunction is necessary to make the declaratory judgment effective. Nelson v. Dakota Bankers Trust Co., 132 N.W.2d 903, 1964 N.D. LEXIS 154 (N.D. 1964).

Collateral References.

Applicability to banking business of statutes as to doing business under assumed or fictitious name or designation not showing names of persons interested, 42 A.L.R.2d 516.

6-02-02. Banking corporations — Who may form.

An association for carrying on the business of banking under this title may be formed by any number of natural persons, not less than three, at least two-thirds of whom must be residents of this state. They shall enter into articles of association which must specify in general terms the object for which the association is formed and which may contain any other provisions, not inconsistent with law, which the association may see fit to adopt for the regulation of its business and the conduct of its affairs. These articles must be signed and acknowledged by the persons uniting to form the association and must be filed in the office of the secretary of state.

Source: S.L. 1890, ch. 23, § 1; 1893, ch. 27, § 1; R.C. 1895, § 3226; R.C. 1899, § 3226; S.L. 1905, ch. 165, § 2; R.C. 1905, § 4636; C.L. 1913, § 5147; S.L. 1931, ch. 96, § 8; R.C. 1943, § 6-0202.

Cross-References.

Amending articles of incorporation, see § 10-19.1-17.

Fee for filing articles of incorporation, see § 10-19.1-147.

Secretary of state to issue certificate, see § 10-19.1-11.

Law Reviews.

The Effects of North American Free Trade Agreement (NAFTA) upon North Dakota State Law, 70 N.D. L. Rev. 485 (1994).

6-02-02.1. Nonbank bank not qualified to do business.

It is unlawful for any organization, association, or corporation, which owns or controls an institution insured by the federal deposit insurance corporation, to own or control an institution insured by the federal deposit insurance corporation or eligible to be insured by the federal deposit insurance corporation which accepts deposits that the depositor has a legal right to withdraw on demand or engages in the business of making commercial loans but does not do both.

Source: S.L. 1985, ch. 111, § 3.

6-02-03. Capital stock, surplus, and federal deposit insurance requirements.

The capital stock of any banking association organized after June 30, 1987, must be not less than one hundred thousand dollars. In addition to such capital requirements, there must be subscribed and paid in at the time of organization a surplus of not less than fifty thousand dollars. The state banking board may require such additional capital, surplus, and undivided profits as it may determine necessary to properly serve the area and to protect the public interest. All of the capital stock and surplus of every association must be paid in before it is authorized to commence business and evidence of such payment either in actual money or a deposit in a previously approved correspondent bank must be furnished to the commissioner before the certificate of authority may be delivered to it. A banking association shall secure federal deposit insurance corporation insurance of deposits before it is authorized to commence business. Evidence of securing such insurance must be furnished to the commissioner before the certificate of authority may be delivered to the banking association.

Source: S.L. 1890, ch. 23, § 6; 1893, ch. 27, § 6; 1895, ch. 106, § 1; R.C. 1895, § 3231; S.L. 1897, ch. 31; R.C. 1899, § 3231; S.L. 1901, ch. 29, § 1; 1905, ch. 165, § 7; R.C. 1905, § 4641; S.L. 1911, ch. 55, § 3; C.L. 1913, § 5155; S.L. 1915, ch. 56, § 1; 1925 Supp., § 5155; S.L. 1931, ch. 96, § 17; 1935, ch. 93, § 1; 1943, ch. 88, § 1; R.C. 1943, § 6-0203; S.L. 1965, ch. 85, § 1; 1977, ch. 67, § 1; 1987, ch. 103, § 1.

Cross-References.

Operation after July 1, 1978, without federal deposit insurance prohibited, see § 6-03-67.1.

6-02-04. Organization certificate — Contents.

The persons uniting to form such an organization shall prepare an organization certificate, bearing their signatures, which must state specifically:

  1. The name assumed by such association, and such name may not be the name of any other bank in this state, nor of any bank heretofore incorporated in the state of North Dakota.
  2. The place where the business of discount and deposit is to be carried on.
  3. The amount of the capital stock and the number of shares into which the same must be divided.
  4. The names and places of residence of the shareholders and the number of shares held by each of them.
  5. The respective dates at which such bank shall commence and terminate business.

Source: S.L. 1980, ch. 23, § 2; 1893, ch. 27, § 2; R.C. 1895, § 3227; R.C. 1899, § 3227; S.L. 1905, ch. 165, § 3; R.C. 1905, § 4637; C.L. 1913, § 5148; S.L. 1931, ch. 96, § 9; R.C. 1943, § 6-0204.

6-02-05. Acknowledgment of organization certificate — Application for certificate of authority — Notice of hearing.

The organization certificate must be acknowledged before a notary public, and, the acknowledged certificate must be authenticated by the seal of the notary. The authenticated certificate must be transmitted to the state banking board with a request for permission to present the same to the secretary of state, with application for the issuance of a certificate of authority. Upon receiving such organization certificate, the board shall cause notice of the application to be published in the official newspaper of the county within which such association is proposed to be established. The notice must contain a statement of a time when and place where the board will hear the application and must specify that any person objecting the application may appear and show cause why such application should not be approved. Upon the consolidation of banks, acquisition pursuant to chapter 6-07.2, or the conversion of a national bank to a state bank, notice of such hearing need not be given.

Source: S.L. 1890, ch. 23, § 3; 1893, ch. 27, § 3; R.C. 1895, § 3228; R.C. 1899, § 3228; S.L. 1905, ch. 165, § 4; R.C. 1905, § 4638; S.L. 1911, ch. 55, § 2; C.L. 1913, § 5149; S.L. 1927, ch. 91, § 1; 1931, ch. 96, § 10, subs. a; 1933, ch. 73, § 1; R.C. 1943, § 6-0205; S.L. 1987, ch. 120, § 3; 1999, ch. 278, § 1; 2021, ch. 77, § 3, effective August 1, 2021.

6-02-06. Hearing by board — Conclusions — Management.

  1. At the time and place stated, and through any sources of information at its command, the board diligently shall inquire whether the place where such banking association is proposed to be located is in need of further banking facilities, whether the proposed association is adapted to the filling of such need, and whether the proposed incorporators are possessed of such character, integrity, reputation, and financial standing as shown by a detailed financial statement to be furnished by them, and such statement to be held confidential by the board, that their connection with the banking association will be beneficial to the public welfare of the community in which such bank is proposed to be established. The board shall hear any reasons advanced by the applicants why they should be permitted to organize the proposed association and any reasons advanced by any person why such association should not be permitted to be organized. At the termination of such hearing, the board shall make a statement in writing of its conclusions and conditions if any, and if it finds that the proposed association should not be permitted to organize, it shall state the reasons why. If approval is granted, a copy of the board’s order must be attached to the organization certificate and both must be presented to the secretary of state. A determination in favor of such organization must be joined in by a majority of all the members of the board.
  2. If the proposed association is permitted to organize, the state banking board shall inquire into the qualifications of the management of the proposed bank, including experience with financial institutions and other related experience. The board’s inquiry into the qualifications of management are confidential.

Source: S.L. 1927, ch. 91, § 1; 1931, ch. 96, § 10, subs. a; 1933, ch. 73, § 1; R.C. 1943, § 6-0206; S.L. 1965, ch. 85, § 2; 1969, ch. 100, § 1; 1979, ch. 121, § 2; 1981, ch. 106, § 1.

Notes to Decisions

“Need”.

Legislature did not intend to require applicant to show absolute necessity for new banking facility in given trade area; intent in use of term “need” was to require state banking board, in determining whether or not another banking facility is needed for a given trade area, to look at all available factors as viewed in light of general purpose of banking regulations. American State Bank v. State Banking Bd., 289 N.W.2d 222, 1980 N.D. LEXIS 175 (N.D. 1980).

6-02-07. Determination of board — Recording of organization certificate.

If the determination of the state banking board is in favor of the applicants, the organization certificate and permission of the board accompanying the same must be recorded in the office of the recorder of the county in which such banking association is to be established, and the same must be transmitted to and received by the secretary of state. The secretary of state shall record and carefully preserve it in the secretary of state’s office and shall certify the facts to the state banking board. The secretary of state then shall issue a certificate of authority to the corporation, and such certificate of authority must be transmitted to and held by the commissioner until an examination is made and the certificate of the commissioner or the deputy examiner procured to the effect that the capital stock and required surplus have been paid in full, that federal deposit insurance corporation insurance of deposits has been secured, and that all conditions of the law have been complied with strictly. If the determination of the state banking board is against the said application, such organization certificate must not be recorded in the office of the recorder, and, if presented, it must not be accepted by the secretary of state.

Source: S.L. 1927, ch. 91, § 1; 1931, ch. 96, § 10, subs. a; 1933, ch. 73, § 1; R.C. 1943, § 6-0207; S.L. 1977, ch. 67, § 2; 2001, ch. 120, § 1.

6-02-08. Certificate and authorization published. [Repealed]

Repealed by S.L. 1969, ch. 101, § 1.

6-02-09. Renewal charter.

A renewal charter must not be granted to any association until satisfactory evidence has been furnished to the state banking board that the capital and surplus of the association seeking to renew its charter conforms to the requirements of this title relating to new banking associations, that its articles of incorporation have been amended to comply with this title as necessary, and that its required capital and surplus are paid in.

Source: S.L. 1911, ch. 55, § 3; C.L. 1913, § 5155; S.L. 1915, ch. 56, § 1; 1925 Supp., § 5155; S.L. 1931, ch. 96, § 17; 1935, ch. 93, § 1; 1943, ch. 88, § 1; R.C. 1943, § 6-0209.

CHAPTER 6-03 Powers, Management, and Operation of Banks

6-03-01. Powers before receipt of certificate of authority.

No association may transact any business, except such as is incidental and necessarily preliminary to its organization, until it has been authorized by the secretary of state to commence the business of banking and has received a certificate of authorization, and such certificate has been returned by the commissioner with the commissioner’s certificate that the capital stock and required surplus have been paid in full, that federal deposit insurance corporation insurance of deposits has been secured, and that all conditions of the law have been strictly complied with.

Source: S.L. 1890, ch. 23, § 4; 1893, ch. 27, § 4; R.C. 1895, § 3229, subs. 7; S.L. 1899, ch. 28, § 1, subs. 7; R.C. 1899, § 3229, subs. 7; S.L. 1905, ch. 165, § 5; R.C. 1905, § 4639, subs. 7; S.L. 1913, ch. 51, § 1, subs. 7; C.L. 1913, § 5150, subs. 7; S.L. 1931, ch. 96, § 13, subs. g; R.C. 1943, § 6-0301; S.L. 1977, ch. 67, § 3.

Cross-References.

Proof of federal deposit insurance required before certificate of authority will be delivered, see § 6-02-03.

6-03-02. Powers.

After an association has made and filed articles of association and an organization certificate, it becomes a body corporate, and as such, and in the name designated in the certificate, it, subject to section 6-03-01, has the power to:

  1. Have a perpetual existence, unless it is sooner dissolved according to the provisions of this title, or unless its franchise becomes forfeited by a violation of law.
  2. Make contracts.
  3. Sue and be sued.
  4. Elect or appoint directors, such board to consist of any number of members, not less than three nor more than twenty-five, at least two-thirds of whom must be citizens of the United States, and, by such board of directors, to appoint a president, who must be a member of said board, and such other employees as may be required, to define their duties, to require bonds of them and fix the penalty thereof, and to dismiss such officers and employees, or any of them, and appoint others to fill their places.
  5. Provide, by its board of directors, bylaws not inconsistent with the laws of this state to regulate the manner in which its directors and officers must be elected or appointed. Vacancies in the board of directors, not exceeding one-third of the whole membership thereof in any calendar year, must be filled by a majority vote of the remaining members. The bylaws must provide a method for filling vacancies exceeding that number.
  6. Provide, by its board of directors, bylaws not inconsistent with the laws of this state to regulate the manner in which its stock and property must be transferred, its business conducted, and the privileges granted to it by law exercised and enjoyed.
  7. Exercise, as determined by the board by order or rule, all the incidental powers as are necessary to carry on the business of banking, including discounting and negotiating promissory notes, bills of exchange, drafts, and other evidences of debt; receiving deposits; buying and selling exchange, coin, and bullion; loaning money upon real or personal security, or both; soliciting and receiving deposits in the nature of custodial accounts for the purpose of health savings or similar health care cost funding accounts, retirement fund contracts, or pension programs, and such custodial accounts are exempt from chapter 6-05; and providing services to its customers involving electronic transfer of funds to the same extent that other financial institutions chartered and regulated by an agency of the federal government are permitted to provide those services within this state. A bank that provides electronic funds transfer equipment and service to its customers, at premises separate from its main banking house or duly authorized facility approved by the state banking board, must make the equipment and service available for use by customers of any other bank upon the request of the other bank to share its use and the agreement of the other bank to share pro rata all costs incurred in connection with its installation and operation, and the electronic operations are not deemed to be the establishment of a branch, nor of a separate facility. The electronic operations at premises separate from its banking house or duly authorized facility must be considered a customer electronic funds transfer center and may be established subject to rules that the state banking board adopts.
  8. Enter into contracts, incur obligations, and generally to perform all acts necessary or appropriate to take advantage of any and all memberships, loans, subscriptions, contracts, grants, rights, or privileges which may be or become available or may inure to banking institutions or to their depositors, creditors, stockholders, conservators, receivers, or liquidators under the provisions of the federal Act creating the federal deposit insurance corporation or under any other Act or regulation of Congress to aid, regulate, or safeguard banking institutions and their depositors, including any amendments thereto or substitution therefor, when authorized so to do by its board of directors.
  9. Subscribe for and acquire any stock, debentures, bonds, or other types of securities of the federal deposit insurance corporation and to comply with the lawful regulations and requirements from time to time issued or made by such corporation.
  10. Take, receive, and hold United States postal savings deposits and to take any action necessary to procure the deposit of the same.
  11. Enter into the business of dealing in securities and stock for the purpose of purchasing and selling such securities and stock without recourse, solely upon the order, and for the account of individual and institutional customers and to provide portfolio investment advisory, management, information, forecasting, and research services to such customers in combination with or separate from such purchases and sales.
  12. Exercise fiduciary powers upon application as provided under section 6-05-01 as the board may prescribe by rule.
  13. Invest all moneys received by it in a trust, in authorized securities, and be responsible to the owner or a third-party beneficiary for the validity, regularity, quality, value, and genuineness of these investments and securities at the time made and for the safekeeping of these securities and the evidences of the securities. When special directions are given in any order, judgment, decree, will, or other written instrument as to the particular manner or the particular class or kind of securities or property in which any investment may be made, a bank shall follow this direction and, in such case, it is not further responsible by reason of the performance of the trust. A bank may retain and continue any investment and security or securities coming into its possession in any fiduciary capacity. For the faithful discharge of its duties and the discharge of its trust, it is entitled to reasonable compensation or an amount as has been or may be agreed upon by the parties and all necessary expenses, with legal interest on those amounts. The trustee may acquire and retain securities of any open-end or closed-end management type investment company or investment trust registered under the Federal Investment Company Act of 1940 [Pub. L. 76-686; 54 Stat.789; 15U.S.C. 80a-1-80a-52]. The fact that the banking institution, or an affiliate of the banking institution, is providing services to the investment company or trust as investment advisor, sponsor, broker, distributor, custodian, transfer agent, registrar, or otherwise and receiving compensation for the services does not preclude the trustee from investing in the securities of that investment company or trust. The banking institution and trust shall disclose to all current income beneficiaries of the trust the rate, formula, and method of the compensation, and the relationship of ownership. No compensation or commission paid or agreed to be paid to it for the negotiation of a loan or the execution of a trust may be deemed interest within the meaning of the law, nor may any excess thereof over the legal rate be deemed usury.

Source: S.L. 1890, ch. 23, § 4; 1893, ch. 27, § 4; R.C. 1895, § 3229; S.L. 1899, ch. 28, § 1; R.C. 1899, § 3229; S.L. 1905, ch. 165, § 5; R.C. 1905, § 4639; S.L. 1913, ch. 51, § 1; C.L. 1913, § 5150; S.L. 1931, ch. 96, § 13, subss. a, b, c, d, e, f; 1935, ch. 95, § 2; R.C. 1943, § 6-0302; S.L. 1969, ch. 102, § 1; 1975, ch. 68, § 1; 1981, ch. 107, § 1; 1987, ch. 104, § 1; 1993, ch. 67, § 2; 1995, ch. 79, § 7; 1995, ch. 82, § 1; 1995, ch. 83, § 1; 1997, ch. 78, § 4; 1997, ch. 79, § 4; 1999, ch. 81, § 1; 2007, ch. 82, § 1; 2009, ch. 95, § 1; 2011, ch. 76, § 2; 2017, ch. 73, § 1, effective August 1, 2017.

Cross-References.

Credit union, powers, see § 6-06-06.

Records of business transactions and corporate meetings required, see § 10-19.1-84.

Notes to Decisions

Application to National Banks.

Pursuant to 12 USCS section 36(c), subsection 8 of this section provides authority for and limitations upon customer bank communications terminal (CBCT) branch banking by national banks in North Dakota. State Bank of Fargo v. Merchants Nat'l Bank & Trust Co., 451 F. Supp. 775, 1978 U.S. Dist. LEXIS 17467 (D.N.D. 1978), aff'd, 593 F.2d 341, 1979 U.S. App. LEXIS 16567 (8th Cir. N.D. 1979).

Borrowing Money.

A cashier of a state bank cannot borrow money without special authority from board of directors. First Nat’l Bank v. Michigan City Bank, 8 N.D. 608, 80 N.W. 766 (1899), distinguished, First Nat’l Bank v. Bakken, 17 N.D. 224, 116 N.W. 92 (1908) and Farmers' State Bank v. Couture, 45 N.D. 401, 178 N.W. 138, 1920 N.D. LEXIS 139 (N.D. 1920).

Custody of Will.

A bank has no authority within its charter, implied or incidental, to be custodian of a will and, in the absence of consideration or benefit, no liability attaches to the bank for failure after death of a testator to deliver the will. Britton v. Elk Valley Bank, 54 N.D. 858, 211 N.W. 810, 1926 N.D. LEXIS 97 (N.D. 1926).

Electronic Transfer of Funds.

State banks have the same rights with respect to customer bank communications terminal (CBCT) banking in North Dakota that are permitted to any federally regulated financial institution, including federally chartered savings and loan associations and credit unions as well as national banks, that are operating CBCTs in North Dakota. State Bank of Fargo v. Merchants Nat'l Bank & Trust Co., 451 F. Supp. 775, 1978 U.S. Dist. LEXIS 17467 (D.N.D. 1978), aff'd, 593 F.2d 341, 1979 U.S. App. LEXIS 16567 (8th Cir. N.D. 1979).

Fidelity Bonds.

It is the duty of the board of bank directors to procure and file a surety bond insuring their own fidelity as officers and employees of the bank. McIntosh v. Dakota Trust Co., 52 N.D. 752, 204 N.W. 818, 1925 N.D. LEXIS 146 (N.D. 1925).

Governing Body of Bank.

The board of directors constitutes the governing body of the bank, and the president and cashier its active managing agents in the conduct of its business. McCarty v. Kepreta, 24 N.D. 395, 139 N.W. 992, 1913 N.D. LEXIS 9 (N.D. 1913).

Guaranty of Payment.

Unless the charter or statute expressly permits it, a bank has not the power to become the obligator of another, except as it is necessary to dispose of its own paper and securities. International Harvester Co. v. State Bank, 38 N.D. 632, 166 N.W. 507, 1918 N.D. LEXIS 1 (N.D. 1918).

Loan Broker.

Acting as a loan broker in transactions where the funds of the bank are not loaned is not exercising a power incident to the banking business. Security State Bank v. Fischer, 42 N.D. 35, 171 N.W. 866, 1919 N.D. LEXIS 116 (N.D. 1919).

Pledging Assets to Secure Deposit.

Pledging assets to secure a deposit is not sustained as an exercise of a bank’s incidental power, and its attempt to pledge assets to secure a deposit is not incidental to the privilege of receiving deposits. Divide County v. Baird, 55 N.D. 45, 212 N.W. 236, 1926 N.D. LEXIS 42 (N.D. 1926).

Title to Property.

The receiver of a bank holds property as such by the same title as the bank, subject to liens, priorities, and equities existing at the time of his appointment. City of Williston v. Ludowese, 53 N.D. 797, 208 N.W. 82, 1926 N.D. LEXIS 24 (N.D. 1926).

Collateral References.

Devise or bequest, power and capacity of bank to take, 8 A.L.R.2d 454.

Charities: power of a business corporation to donate to a charitable or similar institution, 39 A.L.R.2d 1192, 1195.

Partnership or joint venture, banking corporation’s power to enter into, 60 A.L.R.2d 917.

Bank’s liability for breach of implied contract of good faith and fair dealing, 55 A.L.R.4th 1026.

Law Reviews.

The Effects of North American Free Trade Agreement (NAFTA) upon North Dakota State Law, 70 N.D. L. Rev. 485 (1994).

6-03-02.1. Indemnification by banking association.

Each banking association has the same power to indemnify as provided for business corporations in section 10-19.1-91.

Source: S.L. 1977, ch. 68, § 1; 1989, ch. 100, § 1.

6-03-02.2. Issuance of certificates of deposit — Penalty.

Certificates of deposit, as defined in section 41-03-04, may only be issued in this state by financial institutions authorized to issue certificates of deposit and chartered to do business in this state under this chapter or as authorized under section 6-06-06.1. Any person violating this section is subject to a civil penalty not to exceed five thousand dollars.

Source: S.L. 1985, ch. 119, § 1; 1991, ch. 82, § 2; 2007, ch. 78, § 2.

6-03-02.3. Parity for state and national banks.

Subject to authorization by the state banking board, acting by order or rule, a state bank has the same powers as a national bank and may engage directly or indirectly in any activity in which a bank could engage if the state bank were nationally chartered.

Source: S.L. 2007, ch. 77, § 2.

6-03-03. Directors — Qualifying shares — Issue and transfer. [Repealed]

Repealed by S.L. 1985, ch. 116, § 2.

6-03-04. Director’s oath of office — Filing.

Every director, when elected or appointed, shall take an oath that the director shall, so far as the duty devolves upon a director, diligently and honestly administer the affairs of the association and will not knowingly violate or willingly permit to be violated any of the provisions of this title. Such oath, subscribed by the director making it and certified by the officer before whom it was taken, at once must be transmitted to the commissioner to be filed in the commissioner’s office.

Source: S.L. 1890, ch. 23, § 14; 1893, ch. 27, § 14; R.C. 1895, § 3239; R.C. 1899, § 3239; S.L. 1905, ch. 165, § 15; R.C. 1905, § 4649; C.L. 1913, § 5164; S.L. 1931, ch. 96, § 26; R.C. 1943, § 6-0304; S.L. 1969, ch. 103, § 1; 1985, ch. 116, § 1.

6-03-04.1. Standard of conduct for directors of financial institutions.

  1. A director shall discharge the duties of the position of director in good faith, in a manner the director reasonably believes to be in the best interests of the financial institution, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. A person who so performs those duties is not liable by reason of being or having been a director of the financial institution.
  2. A director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by:
    1. One or more officers or employees of the financial institution whom the director reasonably believes to be reliable and competent in the matters presented;
    2. Counsel, public accountants, or other persons as to matters the director reasonably believes are within the person’s professional or expert competence; or
    3. A committee of the board upon which the director does not serve, duly established by the board as to matters within its designated authority, if the director reasonably believes the committee to merit confidence.
  3. Subsection 2 does not apply to a director who has specialized knowledge concerning the matter in question that makes the reliance otherwise permitted by subsection 2 unwarranted.
  4. A director who is present at a meeting of the board when an action is approved by the affirmative vote of a majority of the directors present is presumed to have assented to the action approved, unless the director:
    1. Objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting, in which case the director shall not be considered to be present at the meeting for any purpose;
    2. Votes against the action at the meeting; or
    3. Is prohibited from voting on the action:
      1. By the articles;
      2. By the bylaws;
      3. As the result of a decision to approve, ratify, or authorize a transaction that meets the standards and follows the process stated in section 10-19.1-51 for a business corporation; or
      4. By a conflict of interest policy adopted by the board.
  5. A director’s personal liability to the financial institution or its shareholders for monetary damages for breach of fiduciary duty as a director may be eliminated or limited in the articles. The articles may not eliminate or limit the liability of a director:
    1. For any breach of the director’s duty of loyalty to the financial institution or its shareholders;
    2. For acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
    3. For illegal distributions which a director who is present and not disqualified from acting has voted for or failed to vote against;
    4. For any transaction from which the director derived an improper personal benefit; or
    5. For any act or omission occurring prior to the date when the provision in the articles eliminating or limiting liability becomes effective.
  6. In discharging the duties of the position of director, a director may, in considering the best interests of the financial institution, consider the interests of the financial institution’s employees, customers, suppliers, and creditors; the economy of the state and nation; community and societal considerations; and the long-term and short-term interests of the financial institution and its shareholders, including the possibility these interests may be best served by the continued independence of the financial institution.

Source: S.L. 2013, ch. 78, § 1.

6-03-05. Loans on real estate — Regulation — Limitation.

  1. Before any real estate loan equal to or more than four hundred thousand dollars is made, an appraisal must be conducted by a licensed or certified appraiser if required by the federal Financial Reform, Recovery, and Enforcement Act of 1989 [Pub. L. 101-73; 103 Stat. 512; 12 U.S.C. 3332 et seq.].
  2. Before any real estate loan that does not meet the requirements of subsection 1 is made, a bank must obtain an appropriate evaluation of real property collateral for transactions if an appraisal by a licensed or certified appraiser is not obtained.
  3. Regardless of the value of a real estate loan, the commissioner may issue an order requiring an appraisal by a licensed or certified appraiser when necessary to address safety and soundness concerns. Any real estate loan made must conform to loan-to-value limits as established by rule by the state banking board under chapter 28-32.

Source: S.L. 1899, ch. 28, § 1, subs. 8; R.C. 1899, § 3229, subs. 8; S.L. 1905, ch. 165, § 5, subs. 8; R.C. 1905, § 4639, subs. 8; S.L. 1913, ch. 51, § 1, subs. 8; C.L. 1913, § 5150, subs. 8; S.L. 1931, ch. 96, § 13, subs. h; R.C. 1943, § 6-0305; S.L. 1959, ch. 103, § 1; 1963, ch. 95, § 1; 1965, ch. 86, § 1; 1971, ch. 103, § 1; 1973, ch. 65, § 1; 1977, ch. 69, § 1; 1985, ch. 117, § 1; 1991, ch. 83, § 1; 1993, ch. 70, § 1; 1995, ch. 84, § 1; 1997, ch. 81, § 1; 2005, ch. 82, § 1; 2013, ch. 77, § 13; 2021, ch. 76, § 5, effective April 13, 2021.

6-03-05.1. Additional optional loans and advances. [Repealed]

Repealed by S.L. 1991, ch. 84, § 1.

6-03-05.2. Agricultural loan amortization and deferral. [Expired]

Expired under S.L. 1989, ch. 99, § 3.

6-03-06. Sale of real estate loans.

In selling or disposing of loans made upon real estate security, no association has power to guaranty the payment or collection thereof except as necessary to sell residential mortgage loans on the secondary market, and any such guaranty made in violation of this provision is not binding on the association but is upon the officer or other person making the same.

Source: S.L. 1899, ch. 28, § 1, subs. 8; R.C. 1899, § 3229, subs. 8; S.L. 1905, ch. 165, § 5, subs. 8; R.C. 1905, § 4639, subs. 8; S.L. 1913, ch. 51, § 1, subs. 8; C.L. 1913, § 5150, subs. 8; S.L. 1931, ch. 96, § 13, subs. h; R.C. 1943, § 6-0306; 2009, ch. 96, § 1.

Notes to Decisions

Endorsement of Notes by Cashier.

Where a bank without question receives and applies to its own use money loaned by another bank on the security of notes endorsed by its cashier, it cannot question the cashier’s authority to agree that the amounts of those notes when due should be charged against it. Merchants' Nat'l Bank v. First Nat'l Bank, 238 F. 502, 1916 U.S. App. LEXIS 1368 (8th Cir. N.D. 1916).

Guaranty of Payment.

Where contract of endorsement and guaranty of note was not void upon its face, defense of ultra vires must not only be pleaded, but proved. International Harvester Co. v. State Bank, 38 N.D. 632, 166 N.W. 507, 1918 N.D. LEXIS 1 (N.D. 1918).

Pledge of Assets to Secure Deposit.

Pledging assets to secure a deposit is not sustained as an exercise of a bank’s incidental power, and its attempt to pledge assets to secure a deposit is not incidental to the privilege of receiving deposits. Divide County v. Baird, 55 N.D. 45, 212 N.W. 236, 1926 N.D. LEXIS 42 (N.D. 1926).

6-03-07. Investment in banking facility, furniture, and fixtures — Limitation.

A state banking association may not invest more than sixty-five percent of the amount of its unimpaired capital stock, surplus, and undivided profits in a banking facility, furniture, fixtures, and equipment without the approval of the commissioner or the state banking board.

Source: S.L. 1890, ch. 23, § 5; 1893, ch. 27, § 5; R.C. 1895, § 3230, subs. 1; S.L. 1899, ch. 28, § 2, subs. 1; R.C. 1899, § 3230, subs. 1; S.L. 1905, ch. 165, § 6, subs. 1; R.C. 1905, § 4640, subs. 1; S.L. 1911, ch. 54, § 1; 1913, ch. 52, § 1; C.L. 1913, § 5151; S.L. 1931, ch. 96, § 14; 1933, ch. 73, § 3; R.C. 1943, § 6-0307; S.L. 1955, ch. 99; 1957 Supp., § 6-0307; S.L. 1965, ch. 85, § 3; 1985, ch. 118, § 1; 1993, ch. 71, § 1; 1997, ch. 78, § 5; 1999, ch. 73, § 1.

Cross-References.

Purchase of municipal revenue bonds by state or national banks in amounts not to exceed ten percent of their capital and surplus, see § 40-57-10.

Notes to Decisions

Contract to Purchase Land.

A bank’s contract to purchase land in violation of the limitation fixed is not enforceable. Smith v. Rennix, 52 N.D. 935, 52 N.D. 938, 204 N.W. 843, 1925 N.D. LEXIS 154 (N.D. 1925).

Electric Appliances.

Electric appliances, which are necessary to furnish light through a bank building, are fixtures within the meaning of this section. Farmers State Bank v. Richter, 48 N.D. 1233, 189 N.W. 242, 1922 N.D. LEXIS 168 (N.D. 1922).

Erection of Bank Building.

This section does not prohibit the use of undivided profits and thirty percent of the capital stock and unimpaired surplus for the erection of a bank building. Sarles v. Scandinavian Am. Bank, 33 N.D. 40, 156 N.W. 556, 1915 N.D. LEXIS 44 (N.D. 1915).

6-03-08. Powers as to other real estate.

Every state banking association has the power to purchase, hold, and convey other real estate as herein provided, and not otherwise:

  1. Such as is mortgaged to it in good faith by way of security for loans or for debts previously contracted.
  2. Such as is conveyed to it in good faith in satisfaction of debts previously contracted in the course of its dealings.
  3. Such as it purchases at sales under judgments, decrees, or mortgages held by the association or purchases to secure debts due to it.

Upon transfer to other real estate owned, a current appraisal must be conducted by an individual who is independent of the transaction. Notwithstanding other sections of this chapter, a bank may apply to the commissioner for authority to exchange its interest in real property acquired in satisfaction of a debt previously contracted for an interest in an entity that would dispose of the real property. If the commissioner’s decision with respect to an application is unfavorable, the applicant bank may appeal the decision to the state banking board by filing a notice of appeal with the commissioner within twenty business days after the commissioner has notified the applicant bank of the decision.

Source: S.L. 1890, ch. 23, § 5; 1893, ch. 27, § 5; R.C. 1895, § 3230; S.L. 1899, ch. 28, § 2; R.C. 1899, § 3230; S.L. 1905, ch. 165, § 6; R.C. 1905, § 4640; S.L. 1911, ch. 54, § 2; 1913, ch. 52, § 2; C.L. 1913, § 5152; S.L. 1931, ch. 96, § 15; R.C. 1943, § 6-0308; 1991, ch. 83, § 2; 1993, ch. 70, § 2; 2011, ch. 76, § 3.

Notes to Decisions

Deed As Security for Debt.

A bank may receive a deed to real property as security for past indebtedness, as well as for contemplated advances agreed upon. Merchants State Bank v. Tufts, 14 N.D. 238, 103 N.W. 760, 1905 N.D. LEXIS 45 (N.D. 1905).

Void Contract.

Where a contract by a banking association is contrary to statute, it is void and the bank is not liable for the price agreed to be paid. Jarski v. Farmers' & Merchants' State Bank, 53 N.D. 470, 206 N.W. 773, 1925 N.D. LEXIS 102 (N.D. 1925).

6-03-09. Holding of real estate — Limitation.

No banking association may hold the possession of any real estate under mortgage, nor title and possession of any real estate purchased to satisfy indebtedness, for a longer period than five years from the date of acquiring title thereto unless such time has been extended by certificate of the commissioner.

Source: S.L. 1890, ch. 23, § 5; 1893, ch. 27, § 5; R.C. 1895, § 3230, subs. 4; S.L. 1899, ch. 28, § 2, subs. 4; R.C. 1899, § 3230, subs. 4; S.L. 1905, ch. 165, § 6, subs. 4; R.C. 1905, § 4640, subs. 4; S.L. 1911, ch. 54, § 2; 1913, ch. 52, § 2; C.L. 1913, § 5152; S.L. 1931, ch. 96, § 15, subs. 3; R.C. 1943, § 6-0309.

Notes to Decisions

Contract to Pay Mortgage.

A contract by a bank to pay a mortgage on land conveyed to it is unenforceable. Smith v. Rennix, 52 N.D. 935, 52 N.D. 938, 204 N.W. 843, 1925 N.D. LEXIS 154 (N.D. 1925).

Divestiture Period.

Because former section 10-06-13 was the more recent enactment, state banks were subject to the three-year divestiture period under section 10-06-13(5) with regard to farmland or ranchland, rather than the five-year period under this section. State v. Liberty Nat'l Bank & Trust Co., 427 N.W.2d 307, 1988 N.D. LEXIS 149 (N.D.), cert. denied, 488 U.S. 956, 109 S. Ct. 393, 102 L. Ed. 2d 382, 1988 U.S. LEXIS 5086 (U.S. 1988).

Void Contract.

Where a contract by a banking association is contrary to statute, it is void and the bank is not liable for the price agreed to be paid. Jarski v. Farmers' & Merchants' State Bank, 53 N.D. 470, 206 N.W. 773, 1925 N.D. LEXIS 102 (N.D. 1925).

Law Reviews.

Banks and Banking — States: Three year divestiture period required for creditor corporation under North Dakota’s corporate farming statute not pre-empted by the national bank act, 65 N.D. L. Rev. 529 (1989).

6-03-10. Violation of powers — Penalty.

Any banking association violating the provisions of the preceding sections of this chapter relating to powers, at the discretion of the state banking board, shall forfeit its charter. Any officer, director, or employee who knowingly violates or permits the violation of any of such provisions is guilty of a class B misdemeanor.

Source: S.L. 1911, ch. 54, § 3; 1913, ch. 52, § 3; C.L. 1913, § 5153; S.L. 1931, ch. 96, § 16; R.C. 1943, § 6-0310; S.L. 1975, ch. 106, § 41.

Notes to Decisions

Protection of Depositors.

This statute was intended primarily for the protection of depositors. Jarski v. Farmers' & Merchants' State Bank, 53 N.D. 470, 206 N.W. 773, 1925 N.D. LEXIS 102 (N.D. 1925).

Collateral References.

Bank’s liability to customer for imposing allegedly excessive service charges, 73 A.L.R.4th 1028.

6-03-11. Conversion, consolidation, or merger.

Any two or more banking institutions upon making application to the commissioner or the state banking board may consolidate or merge if authorized by the commissioner or board into one banking institution under the charter of either existing banking institution on such terms and conditions as lawfully may be agreed upon by a majority of the board of directors of each banking institution proposing to consolidate or merge subject to rules adopted by the state banking board. Before becoming final, such consolidation or merger must be ratified and confirmed by the vote of the shareholders of each such banking institution owning at least two-thirds of its capital stock outstanding at a meeting to be held on the call of the directors. Notice of such meeting and of the purpose thereof must be given to each shareholder of record by registered or certified mail at least ten days prior to the meeting. The shareholders may unanimously waive such notice and may consent to such meeting and consolidation or merger in writing. The capital stock and surplus of such consolidated banking institution must not be less than that required under this title for the organization of a banking institution of the class of the largest consolidating banking institution. Immediately after the consolidation or merger a full report thereof, including a statement of the assets and liabilities of the consolidated banking institution, must be made to the commissioner by the surviving banking institution. Any banking institution may without approval by any state authority convert into or merge or consolidate with a national banking association as provided by federal law. A national bank proposing to merge into a state-chartered bank shall grant the commissioner discretionary authority to conduct an examination. The commissioner shall set fees for such examination at an hourly rate sufficient to cover all reasonable expenses of the department of financial institutions associated with the examination. Fees must be collected by the commissioner and deposited in the financial institutions regulatory fund.

Source: S.L. 1923, ch. 138; 1925 Supp., §§ 5191c1 to 5191c23; S.L. 1927, ch. 93, § 1; 1931, ch. 96, § 52; R.C. 1943, § 6-0311; S.L. 1949, ch. 104, § 1; 1957 Supp., § 6-0311; S.L. 1965, ch. 84, § 2; 1991, ch. 85, § 1; 2001, ch. 88, § 12; 2013, ch. 77, § 14; 2021, ch. 76, § 6, effective April 13, 2021.

Collateral References.

Valuation of stock of dissenting stockholders in case of consolidation or merger, 48 A.L.R.3d 430.

Construction and application of 12 USCS §§ 2:4-214(c) authorizing conversion of national bank into, or its merger or consolidation with state bank, 15 A.L.R. Fed. 817.

6-03-12. Transfer of assets on consolidation or merger.

All of the rights, property, franchises, and interests of the consolidating or merging bank or trust company are deemed to be transferred to and vested in the bank or trust company into which it is consolidated or merged without other instrument of transfer. The consolidated bank or trust company shall hold and enjoy the same and all rights, property, franchises, and interests in the same manner and to the same extent as were held and enjoyed by the bank or trust company so consolidated or merged therewith, including the holding and performing by any bank or trust company of any and all trust and fiduciary relations whatsoever as to and for which either or any of the banks or trust companies so consolidating or merging may have been appointed, nominated, or designated by any will, agreement, conveyance, or otherwise, whether or not such trust or fiduciary relationship has come into being or has taken effect at the time of the consolidation or transfer. The merging bank or trust company, however, shall transfer all of its real property to the consolidated bank or trust company by good and sufficient deed of conveyance, and for that and other purposes, it remains a body corporate until dissolved in the manner provided in chapter 6-07.2, or if no assets or liabilities remain, until the certificate is canceled by the secretary of state.

Source: S.L. 1923, ch. 138; 1925 Supp., §§ 5191c1 to 5191c23; S.L. 1927, ch. 93, § 1; 1931, ch. 95, § 1; 1931, ch. 96, § 52; R.C. 1943, § 6-0312; S.L. 1991, ch. 81, § 3; 2021, ch. 77, § 4, effective August 1, 2021.

6-03-13. Conversion to national bank — Sale of bank — Removal to new location.

An association organized to do business in any city in this state, and which has sold or converted its business to a national bank or to any other banking association which is continued at the same place, may not use its charter to recommence business at another place without first obtaining the consent of the state banking board. When a banking association which has not so converted or sold its business is located at a place where there is not, or can reasonably project that there will not be, sufficient business for the profitable conduct of a bank, such association may apply to the state banking board for authority to remove its business to some other place within the state and to change its name if desired, and upon the approval of such application, by the board and the proper amendment of the articles of incorporation, the board may issue authority for such removal and change. No such association, however, is permitted to remove its business to any city unless it has the full amount of capital stock and surplus required by this title for a new organization in such city. A banking association may apply to the state banking board for authority to move its main office to any location currently being operated by the banking association as a facility or to another location within the same corporate city limits.

Source: S.L. 1905, ch. 165, § 7; R.C. 1905, § 4641; S.L. 1911, ch. 55, § 3; C.L. 1913, § 5155; S.L. 1915, ch. 56, § 1; 1925 Supp., § 5155; S.L. 1931, ch. 96, § 17; 1935, ch. 93, § 1; 1943, ch. 88, § 1; R.C. 1943, § 6-0313; S.L. 1969, ch. 104, § 1; 2011, ch. 76, § 4; 2013, ch. 77, § 15.

Notes to Decisions

Removal to New Location.

Where bank was located one mile from Canadian border, 97% of potential customers were already customers of bank, and continued growth by bank in its present location was doubtful, state banking board’s decision to grant bank’s application for removal was supported by findings of fact and conclusions of law. Citizens State Bank v. Bank of Hamilton, 238 N.W.2d 655, 1976 N.D. LEXIS 196 (N.D. 1976).

Review on Appeal.

Where state bank applied for permission to change its name and location, competing national bank had standing to appeal state board’s approval of application. In re Bank of Rhame, 231 N.W.2d 801, 1975 N.D. LEXIS 169 (N.D. 1975).

6-03-13.1. Separate facilities authorized.

Upon compliance with section 6-03-13.3, any bank organized under chapter 6-02 and under the supervision of the state banking board, and any national bank doing business in this state, may maintain and operate separate and apart from its banking house facilities, in addition to such service at its main banking house. Any activity incidental to the business of banking may be transacted at a separate facility, including receiving deposits of every kind and nature, cashing checks or orders to pay, issuing exchange, making loans, renting safe deposit boxes, exercising fiduciary powers if authorized by the board, and receiving payments payable at the bank. Whenever any banking institution that has been granted approval to establish and maintain a facility deems it advisable to discontinue the maintenance of the facility, the banking institution may apply to the commissioner or state banking board for cancellation and the commissioner or board may order the cancellation approval within the time the board specifies. The banking institution shall provide notice of the application as required by the board by rule.

Source: S.L. 1963, ch. 96, § 1; 1973, ch. 66, § 1; 1981, ch. 105, § 2; 1981, ch. 109, § 1; 1991, ch. 86, § 1; 1993, ch. 66, § 2; 1995, ch. 79, § 9; 2009, ch. 97, § 1.

6-03-13.2. Further limitations upon facility. [Repealed]

Repealed by S.L. 1991, ch. 86, § 4.

6-03-13.3. Facts considered for approval.

  1. Whenever any bank desires to maintain and operate a facility separate and apart from its banking house, pursuant to section 6-03-13.1, or to move a facility previously established to another location, it shall apply to the commissioner or the comptroller of the currency, as the case may be, for such authority and provide the commissioner with such relevant information as the commissioner may reasonably request. In determining whether to approve the application for such facility, the commissioner shall take into consideration:
    1. The convenience, needs, and welfare of the people of the community and area served; and
    2. The financial strength of the bank in relation to the cost of establishing and maintaining such separate facility.
  2. Upon approval by the commissioner or state banking board of a merger application under section 6-03-11, the former main office and facilities of the banking institutions being merged will become facilities of the surviving banking institution and the banking institution is not required to file an application under this section.
  3. If the commissioner’s decision with respect to an application is unfavorable, the applicant bank may appeal the decision to the state banking board by filing a notice of appeal with the commissioner within twenty days after the commissioner has notified the applicant bank of the decision.

Source: S.L. 1963, ch. 96, § 1; 1973, ch. 66, § 3; 1991, ch. 86, § 2; 2001, ch. 90, § 1; 2005, ch. 83, § 1; 2021, ch. 76, § 7, effective April 13, 2021.

6-03-13.4. Effect of authority.

Every paying and receiving station, banking house or office, or drive-in and walkup facility existing on August 1, 1996, must be considered a separate facility approved by the state banking board or the comptroller of the currency, as the case may be, under this chapter. A facility approved under this section may continue to provide from the facility those services or functions as were permitted to be provided before August 1, 1996. National banking associations located in this state have the same, but no greater, right by virtue of sections 6-03-13.1 and 6-03-13.3 as banks organized under the laws of this state.

Source: S.L. 1963, ch. 96, § 4; 1991, ch. 86, § 3; 1995, ch. 79, § 10.

6-03-13.5. National bank, federal savings association, or state savings and loan association conversion to state bank.

A national bank, federal savings association, or state savings and loan association located in this state which follows the procedure prescribed by federal law to convert into a state bank must be granted a state charter if it meets the provisions of the North Dakota Century Code for the incorporation and chartering of a new state bank. Any requirement that shares must be paid in cash may be satisfied by the exchange of shares of the converted state bank for those of the converting national bank, federal savings association, or state savings and loan association, which may be valued at no more than their fair cash market value. The procedure for incorporation of a state bank may be modified by the board to the extent made necessary by the difference between an ordinary incorporation and a conversion and no public hearing need be held on a conversion application. A national bank, federal savings association, or state savings and loan association proposing to convert into a state-chartered bank shall grant the commissioner discretionary authority to conduct an examination. The commissioner shall set fees for the examination at an hourly rate sufficient to cover all reasonable expenses of the department of financial institutions associated with the examination. Fees must be collected by the commissioner, transferred to the state treasurer, and deposited in the financial institutions regulatory fund.

Source: S.L. 1971, ch. 104, § 1; 1981, ch. 110, § 1; 1991, ch. 85, § 2; 1997, ch. 99, § 1; 2001, ch. 88, § 13.

6-03-13.6. Branch conversions.

Notwithstanding section 6-03-13.1, any bank organized under chapter 6-02, any national bank doing business in this state, or any bank established in this state by any bank holding company doing business in this state as of January 1, 1995, may convert a branch of a federal savings and loan association located in this state which was in existence as of March 1, 1995, purchased by the bank between January 1, 1995, and August 1, 1996, into a facility of the bank to be maintained at the same branch location if the acquisition and conversion does not violate the deposit limitations provisions contained in sections 6-08-30 and 6-08.3-03.1 and the acquisition and conversion of the branch is approved by the appropriate regulatory agencies.

Source: S.L. 1995, ch. 79, § 11; 2003, ch. 48, § 2; 2003, ch. 71, § 1.

6-03-14. Paying and receiving stations authorized. [Repealed]

Repealed by S.L. 1995, ch. 79, § 24.

6-03-14.1. Maintenance of facilities of merged banks. [Repealed]

Repealed by S.L. 1995, ch. 79, § 24.

6-03-14.2. Subsidiary depository institutions as agents.

Any bank subsidiary of a bank holding company may receive deposits, renew time deposits, close loans, service loans, and receive payments on loans and any other obligations as an agent for a depository institution affiliate, subject to any requirements established by the board by rule. Notwithstanding any other law, a bank acting as an agent under this section may not be considered to be a branch of the affiliate. However, a depository institution may not conduct any activity as an agent that it is prohibited from conducting as a principal under any federal or state law.

Source: S.L. 1995, ch. 79, § 8.

6-03-15. Application to state banking board to establish stations. [Repealed]

Repealed by S.L. 1995, ch. 79, § 24.

6-03-15.1. Temporary relocation of bank operations.

In the event of an emergency or other temporary relocation, a bank shall notify the commissioner to relocate its main banking house or facility until the former location is repaired to allow bank operations to resume. No notice or public hearing need be held to act upon the temporary relocation request. The bank shall give the commissioner notice of the bank’s decision to relocate promptly and in any case within three days in the event of an emergency, and at least thirty days prior for other temporary relocations. The notice must describe the bank’s actions and the expected duration of the bank’s relocation. Unless extended by the commissioner, a bank’s authority to change the bank’s location under this section may not exceed sixty days. Notice of the bank’s intention to temporarily relocate must be provided to customers at least ten days before the relocation.

Source: S.L. 1995, ch. 85, § 1; 1997, ch. 79, § 5; 2021, ch. 76, § 8, effective April 13, 2021.

6-03-15.2. Operations during epidemic or emergency — Notice to commissioner.

A bank that operates physical facilities in any area that is experiencing an epidemic or other emergency may adjust the bank’s operations in any manner that is reasonable to protect the bank’s customers, employees, assets, or business. Under this section a bank may temporarily close or relocate offices, employees, or operations; restrict access to offices or services; and change the manner in which the bank provides banking services. A bank shall notify the commissioner of any actions the bank takes under the authority of this section. The bank shall give the commissioner notice promptly and in any case within three business days of the bank’s decision to adjust the bank’s operations. The notice must describe the bank’s actions and the expected duration of the bank’s adjusted operations. Unless extended by the commissioner, a bank’s authority to change the bank’s operations under this section may not exceed sixty days.

Source: S.L. 2007, ch. 83, § 1.

6-03-16. Investigation and procedure on application to establish station. [Repealed]

Repealed by S.L. 1995, ch. 79, § 24.

6-03-17. Transaction of business at and regulation of station. [Repealed]

Repealed by S.L. 1995, ch. 79, § 24.

6-03-18. When station must be discontinued — Revocation of permit. [Repealed]

Repealed by S.L. 1995, ch. 79, § 24.

6-03-19. Cancellation of station permit on application to board. [Repealed]

Repealed by S.L. 1995, ch. 79, § 24.

6-03-20. Impairment of capital — Notice to commissioner — Penalty.

The president, cashier, or other officer in active charge of any state banking association shall notify the commissioner immediately by certified mail of any impairment of capital or reduction of capital stock thereof, and any such officer failing so to do is guilty of a class B misdemeanor.

Source: S.L. 1931, ch. 96, § 19; R.C. 1943, § 6-0320; S.L. 1975, ch. 106, § 42.

6-03-21. Impairment of capital — Dividends stopped — Action by board — Restoration.

Whenever the capital of any state banking association becomes impaired or the capital stock reduced below the amount required by this title or by the articles of incorporation, no dividend may be declared nor distribution of profits made thereafter while any debts of the association remain unsatisfied, nor until the impairment or deficiency is made good. Whenever it appears that the capital of any state banking association has become impaired or its capital stock reduced, the commissioner shall report the same to the state banking board immediately. The commissioner thereupon shall issue and enforce the necessary order restraining the declaring of dividends and requiring that the impairment or deficiency be made good. The impairment or deficiency must be made good within sixty days thereafter, or the commissioner, upon the order or direction of the state banking board, may take charge of the state banking association and proceed to liquidate the association as in case of insolvency.

Source: S.L. 1905, ch. 165, § 37; R.C. 1905, § 4671; C.L. 1913, § 5186; S.L. 1931, ch. 96, § 18; R.C. 1943, § 6-0321; 1997, ch. 78, § 6.

6-03-22. Impairment of capital — Stock assessments — Notice and limitation.

When the capital of any association becomes impaired or when its capital stock is reduced below the amount required by this title or its articles of incorporation, the board of directors of the association has the power, and it is its duty, immediately to make a pro rata assessment upon all the outstanding stock of the association to make good such impairment or deficiency, and to serve notice thereof by registered or certified mail upon each stockholder of record, directed to such stockholder at the stockholder’s address last known to the board. Any such assessment or assessments may not exceed in the aggregate one hundred percent of the face value of the stock in the first year and may not exceed twenty-five percent in any succeeding year. The notice must specify the date on which the assessment is due and payable, and such date may not be less than ten days nor more than thirty days after the date of mailing the notice of assessment.

Source: S.L. 1931, ch. 96, § 18; R.C. 1943, § 6-0322.

Notes to Decisions

Liability for Assessment.

The owner of state bank stock was not liable for an assessment under this section where he never exercised any of the rights or enjoyed any of the privileges of a stockholder. Security State Bank v. O'Connor, 68 N.D. 44, 276 N.W. 249, 1937 N.D. LEXIS 127 (N.D. 1937).

6-03-23. Capital stock may be increased.

Any association may provide, either by its articles of incorporation, by subsequent resolution, or by written agreement of the holders of a majority of its stock, for an increase in its capital stock from time to time subject to the limitations of this title. No increase in capital stock is valid until the whole amount has been paid in, in cash, and such payment certified under oath by the president or cashier of the association to the secretary of state, nor until the secretary of state executes a certificate specifying that this chapter has been complied with, the amount of the increase in capital stock, and that the increase has been paid in as part of the capital of the association, nor until a copy of such certificate has been filed with the state banking board.

Source: S.L. 1890, ch. 23, § 11; 1893, ch. 27, § 11; R.C. 1895, § 3236; R.C. 1899, § 3236; S.L. 1905, ch. 165, § 12; R.C. 1905, § 4646; C.L. 1913, § 5161; S.L. 1931, ch. 96, § 20, subs. a; R.C. 1943, § 6-0323; S.L. 1981, ch. 110, § 2.

Cross-References.

Securities of state or national bank exempt from regulation of issuance and sale of securities, see § 10-04-05, subs. 2.

6-03-24. Capital stock may be reduced.

Any association may reduce its capital stock to any sum not less than the amount required to authorize the formation of any association by vote of its shareholders owning two-thirds of its stock. No such reduction may be made, however, until the amount thereof proposed is reported to the state banking board and its approval in writing obtained. No such reduction may affect the liability of shareholders for any debts of the association incurred prior to the reduction, and every such reduction must be certified to and a copy of the certificate filed in the same manner as for an increase of capital stock before it becomes valid.

Source: S.L. 1890, ch. 23, § 11; 1893, ch. 27, § 11; R.C. 1895, § 3236; R.C. 1899, § 3236; S.L. 1905, ch. 165, § 12; R.C. 1905, § 4646; C.L. 1913, § 5161; S.L. 1931, ch. 96, § 20, subs. b; R.C. 1943, § 6-0324.

Collateral References.

Reduction of capital stock and distribution of capital assets, 35 A.L.R.2d 1149.

6-03-25. Approval of increase or reduction by stockholders — Notice of stockholders’ meeting.

An increase or reduction of the capital stock of any association is not valid unless approved by the stockholders of the association at a meeting called for that purpose. Notice of the time and place of the meeting stating its object and the amount to which it is proposed to increase or reduce the capital stock of the association must be served personally or by registered or by certified mail on each stockholder of the association at least thirty days prior to the time set for such meeting. The notice must be given to stockholders whose places of residence are unknown or who are not residents of this state by publication of the notice at least once prior to the meeting in a legal newspaper of the county in which the principal office of the association is situated. A vote in favor of an increase in capital stock is not effective until the proceedings of the meeting showing the names of all of the stockholders voting for the increase and the amount of stock owned by each have been entered upon the records of the association.

Source: S.L. 1931, ch. 96, § 20, subs. c; R.C. 1943, § 6-0325; S.L. 1965, ch. 85, § 4.

6-03-26. Meeting not required when all stockholders agree in writing to increase or reduction.

If all the stockholders of an association agree in writing to an increase or reduction in its capital stock, no meeting need be called for the purpose of effecting the increase or reduction. The directors shall file such written agreement, together with the certificate required under sections 6-03-23 and 6-03-24, with the secretary of state, who thereupon shall issue the secretary of state’s certificate that the provisions of this title have been complied with.

Source: S.L. 1931, ch. 96, § 20, subs. d; R.C. 1943, § 6-0326.

6-03-27. List of shareholders to be kept and filed.

  1. The president of every banking institution formed pursuant to the provisions of this title, at all times, shall keep a true and correct list of the names and post-office addresses of all shareholders of such banking institution, with the amount of stock held by each, the date of transfer, and to whom transferred, which list shall be verified on the thirty-first day of December of each year. A copy of the verified list shall be filed in the office of the commissioner on the same date.
  2. The commissioner may request at least annually a list of all shareholders of a bank holding company controlling a state-chartered banking institution.

Source: S.L. 1905, ch. 165, § 36; R.C. 1905, § 4670; C.L. 1913, § 5185; S.L. 1931, ch. 96, § 25; 1943, ch. 88, § 3; R.C. 1943, § 6-0327; S.L. 1979, ch. 125, § 1; 1985, ch. 120, § 1; 1997, ch. 79, § 6; 2013, ch. 77, § 16.

6-03-28. Shares — Value and transfer — Shareholder’s obligation.

The capital stock of each association must be divided into shares of not less than ten dollars each and is deemed personal property and transferable on the books of the association in such manner as may be prescribed by its bylaws or articles of incorporation. A transfer of shares is not valid except between the parties to the transfer until the transfer is entered upon the books of the association and is not valid against the association or any creditor of the association while the registered holder of the shares is indebted to the bank as principal debtor, surety, guarantor, or otherwise. No dividend, interest, or profit may be paid on any stock of the bank or bank holding company as long as any past-due liability of the shareholder continues, but such dividend, interest, or profit must be retained by the association and applied to the discharge of the past-due liability. Every person or corporation becoming a shareholder by any transfer shall succeed, in proportion to the shares acquired by that shareholder, to all rights and liabilities of prior holders of the shares existing by reason of ownership of the shares and no change may be made in the articles of incorporation or bylaws of the association by which the rights, remedies, or security of its existing creditors shall be impaired.

Source: S.L. 1890, ch. 23, § 10; 1893, ch. 27, § 10; R.C. 1895, § 3235; R.C. 1899, § 3235; S.L. 1905, ch. 165, § 11; R.C. 1905, § 4645; C.L. 1913, § 5160; S.L. 1931, ch. 96, § 21; R.C. 1943, § 6-0328; S.L. 1957, ch. 98, § 2; 1957 Supp., § 6-0328; S.L. 1971, ch. 105, § 1; 1991, ch. 81, § 4.

Notes to Decisions

Enforcement of Lien.

A statute making bank stock transfers by a holder indebted to the bank invalid against the bank or its creditors establishes a lien enforceable in equity. Farmers' State Bank v. Herron, 56 N.D. 136, 216 N.W. 341, 1927 N.D. LEXIS 82 (N.D. 1927).

Liability for Assessment.

A pledgee of state bank stock, who sells it in accordance with the terms of the pledge, and becomes the purchaser but never has it transferred on the books, of the pledge, and becomes the purchaser but never has it transferred on the books of the banks, is not a shareholder under this section. Security State Bank v. O'Connor, 68 N.D. 44, 276 N.W. 249, 1937 N.D. LEXIS 127 (N.D. 1937).

6-03-29. Responsibility of shareholders — Double liability. [Repealed]

Repealed by S.L. 1953, ch. 96, § 3.

6-03-29.1. Responsibility of shareholders. [Repealed]

Repealed by omission from this code.

6-03-30. Shareholder’s liability — Limitation — Publication of notice. [Repealed]

Repealed by omission from this code.

6-03-31. Delinquent stock — Sale — Notice.

Whenever any shareholder or shareholder’s assignee fails to pay any assessment of the stock when the assessment is required to be paid, the board of directors of the association may sell at public or private sale, whichever appears to it best for all concerned, so much of the stock, at the best price obtainable, as is necessary to pay the assessment and costs of the sale. The sale must be made on a day certain to be fixed by the board not less than thirty days after the day set for the payment of the assessment. Notice of the time and place of the sale must be given to the shareholder in the manner following:

  1. In the event of a private sale, by forwarding the notice to the person or persons in whose name the stock stands on the books of the association, at least twenty days prior to the date fixed for the sale, by registered or certified mail addressed to the shareholder’s address last known to the board of directors.
  2. In the event of a public sale, by one publication of a notice thereof, at least twenty days prior to the date fixed for such sale, in a newspaper published in the county wherein the association is located.

A sale of stock as herein provided effects an absolute cancellation of the outstanding certificate or certificates in the hands of the delinquent shareholder, or the delinquent shareholder’s assignee or pledgee, and a new certificate must be issued by the association and delivered to the purchaser for the number of shares purchased, and a new certificate for the remaining shares, if any, must be issued to the shareholder and delivered to the shareholder, or the shareholder’s assignee, or pledgee, upon the surrender of the original certificate or certificates involved. Any proceeds of such sale remaining after the delinquent assessment and the expenses of the sale have been fully paid must be paid over to the shareholder, or the shareholder’s assignee or pledgee.

Source: S.L. 1890, ch. 23, § 9; 1893, ch. 27, § 9; R.C. 1895, § 3234; R.C. 1899, § 3234; S.L. 1905, ch. 165, § 10; R.C. 1905, § 4644; C.L. 1913, § 5159; S.L. 1931, ch. 96, § 23; R.C. 1943, § 6-0331.

6-03-32. When no bids for purchase of delinquent stock.

If no bidder who will pay to the association the amount due on the stock and the costs and expenses of sale for the transfer of the stock to that person appears at the time and place set for the sale, no sale may be made, and all the shares of the shareholder must be forfeited to the association together with all amounts previously paid thereon. The association forthwith shall cancel such shares upon its books and records and shall deduct the same from its capital stock and immediately shall notify the commissioner in writing of the action taken. The record of the association’s stock book showing the sale or cancellation of stock is prima facie evidence of the regularity of the proceedings of the sale or cancellation.

Source: S.L. 1890, ch. 23, § 9; 1893, ch. 27, § 9; R.C. 1895, § 3234; R.C. 1899, § 3234; S.L. 1905, ch. 165, § 10; R.C. 1905, § 4644; C.L. 1913, § 5159; S.L. 1931, ch. 96, § 23; R.C. 1943, § 6-0332.

6-03-33. Loans on shares prohibited — Disposal of stock acquired.

No association or banking institution may make any loan or discount on the security of the shares of its own stock or of the stock of any holding company which controls the association or banking institution, nor be a purchaser or holder of any such shares, unless such security or purchase is necessary to prevent loss upon a debt previously contracted in good faith. Stock so acquired must be sold or disposed of at public or private sale within thirty days after it is acquired, and if not sold within such time, it must be canceled and deducted from the capital stock of the association, banking institution, or holding company, and the association, banking institution, or holding company shall notify the commissioner in writing of such cancellation. For the purpose of this section, “control” means ownership, or control directly, indirectly, or through the actions of one or more persons of the power to vote twenty-five percent or more of any class of voting securities of the association or banking institution, of the power to control in any manner the election of a majority of the directors of the association or banking institution, or to direct the management or policies of the association or banking institution.

Source: S.L. 1890, ch. 23, § 19; 1893, ch. 27, § 19; R.C. 1895, § 3244; R.C. 1899, § 3244; S.L. 1905, ch. 165, § 20; R.C. 1905, § 4654; C.L. 1913, § 5169; S.L. 1931, ch. 96, § 24; R.C. 1943, § 6-0333; S.L. 1985, ch. 121, § 1.

Notes to Decisions

Enforcement of Lien.

A statute making bank stock transfers by the holder indebted to the bank invalid against the bank or its creditors establishes a lien enforceable in equity. Farmers' State Bank v. Herron, 56 N.D. 136, 216 N.W. 341, 1927 N.D. LEXIS 82 (N.D. 1927).

6-03-34. Surplus fund required — Dividends only out of earnings not required for surplus.

The board of directors of any association organized under this title may declare and pay dividends out of the net profits of the association subject to the limitations of this chapter. Every such association, as its board of directors deems advisable, shall ascertain, set apart, and convert into a surplus fund at least fifty percent of its net earnings until such surplus fund equals one hundred percent of its common stock, and no dividend may be declared upon its stock except from the remaining fifty percent of its net earnings.

Source: S.L. 1890, ch. 23, § 13; 1893, ch. 27, § 13; R.C. 1895, § 3238; R.C. 1899, § 3238; S.L. 1905, ch. 165, § 14; R.C. 1905, § 4648; C.L. 1913, § 5163; S.L. 1927, ch. 97, §§ 1, 2; 1931, ch. 96, § 31, subss. a, b; 1943, ch. 88, § 4; R.C. 1943, § 6-0334; S.L. 1973, ch. 67, § 1; 1987, ch. 106, § 1; 2003, ch. 68, § 1.

6-03-35. Surplus fund exempt from taxation.

The surplus fund of any association organized under this title, in an amount not exceeding one hundred percent of its capital stock, is exempt from taxation and must not be taken into account in determining the taxable value of the shares of stock of the association.

Source: S.L. 1927, ch. 97, § 1; 1931, ch. 96, § 31, subs. a; R.C. 1943, § 6-0335.

6-03-36. Capital must be maintained — Dividends prohibited under certain conditions.

  1. No director or officer of an association may permit the impairment of an association’s capital by the payment of dividends or otherwise.
  2. Except as provided in subsection 4, no dividend may be paid which exceeds the following amount:
    1. An association’s net profits for the period beginning January first of the year for which the proposed dividends are declared and ending as reported in the most recent quarter-end call report; plus
    2. The association’s net profits for the preceding two calendar years as reported in the year-end call report; less
    3. Any required transfers to:
      1. Surplus; and
      2. Funds for the retirement of preferred stock, capital notes, and debentures.
  3. For the purpose of this section, “net profits” means the institution’s net profits after taxes prior to extraordinary items less dividends as reported on the call reports.
  4. Payment of a dividend which exceeds the calculated amount in subsection 2 may be made only with prior approval of the commissioner or state banking board.

Source: S.L. 1890, ch. 23, § 15; 1893, ch. 27, § 15; R.C. 1895, § 3240; R.C. 1899, § 3240; S.L. 1905, ch. 165, § 16; R.C. 1905, § 4650; C.L. 1913, § 5165; S.L. 1931, ch. 96, § 32; R.C. 1943, § 6-0336; S.L. 1985, ch. 122, § 1; 1987, ch. 106, § 2; 1991, ch. 81, § 5; 1995, ch. 85, § 2.

Cross-References.

Assessment of civil money penalties, see § 6-01-04.3.

6-03-37. Reserve funds.

Every banking association shall have on hand at all times in available funds an amount which meets the requirements of the board of governors of the federal reserve system.

Source: S.L. 1890, ch. 23, § 20; 1893, ch. 27, § 20; R.C. 1895, § 3245; R.C. 1899, § 3245; S.L. 1905, ch. 165, § 21; R.C. 1905, § 4655; C.L. 1913, § 5170; S.L. 1915, ch. 58, § 1; 1919 Sp., ch. 23, § 1; 1925, ch. 95, § 1; 1925 Supp., § 5170; S.L. 1931, ch. 96, § 30; 1937, ch. 96, § 1; 1941, ch. 102, § 1; 1943, ch. 88, § 6; R.C. 1943, § 6-0337; S.L. 1965, ch. 87, § 1; 1969, ch. 106, § 1; 1981, ch. 110, § 3; 2013, ch. 77, § 17.

Notes to Decisions

Computation of Legal Reserve.

Amount due other banks should be deducted in computing legal reserve of a state bank. State ex rel. Lofthus v. Langer, 46 N.D. 462, 177 N.W. 408, 1920 N.D. LEXIS 10 (N.D. 1920).

6-03-37.1. Bank loans of excess reserves.

Obligations representing loans from one business day to the next to any state-chartered bank or national banking association of excess reserve balances from time to time maintained under the provisions of section 6-03-37, as amended, may not be deemed loans or additions to any loans for the purposes of section 6-03-59.

Source: S.L. 1971, ch. 106, § 1.

6-03-38. Assets not to be used in other business — Exceptions — Penalty.

Except as otherwise authorized under this title, a bank may not employ its money or other assets as principal, directly or indirectly, in trade or commerce, nor may a bank employ or invest any of its assets or funds in the stock of any corporation, limited liability company, bank, partnership, firm, or association. However, to the extent a bank subject to the laws of the federal government is permitted to do so, a state bank may purchase shares of stocks, or any other type of securities offered by small business investment companies organized and licensed under Public Law No. 85-699, known as the Small Business Investment Company Act of 1958 [72 Stat. 689; 15 U.S.C. 661 et seq.], and the Small Business Equity Enhancement Act of 1992 [Pub. L. 102-366; 106 Stat. 1007-1020; 15 U.S.C. 661 et seq.], and any amendments thereto, or chapter 10-30, but in no event may any state bank hold securities of small business investment companies in an amount determined by the state banking board, but in no event more than ten percent of the bank’s capital and surplus. A bank may not invest the bank’s assets or funds in speculative margins of stock, bonds, grain, provisions, produce, or other commodities, except that it is lawful for a bank to make advances for grain or other products in store or in transit to market. A bank may invest in subsidiary organizations, when the activities of such organizations are incidental or complementary to the bank’s activities, with the specific approval of the state banking board for each such subsidiary. The state banking board has the same power to make rules for the subsidiary organizations, and to examine the organizations’ records and affairs, as it has for other financial corporations under section 6-01-04. If the state banking board determines that such investments would be detrimental to the interests of a bank’s depositors, the state banking board may direct the bank to divest itself of such subsidiary investments. Any officer, director, or employee of any bank who invests or uses the bank’s funds contrary to this title is guilty of a class A misdemeanor.

Source: S.L. 1905, ch. 165, § 38; R.C. 1905, § 4672; C.L. 1913, § 5187; S.L. 1915, ch. 54, § 1; 1925 Supp., § 5187; S.L. 1931, ch. 96, § 33; R.C. 1943, § 6-0338; S.L. 1967, ch. 87, § 1; 1969, ch. 107, § 1; 1975, ch. 106, § 43; 1985, ch. 123, § 1; 1987, ch. 141, § 15; 1993, ch. 54, § 106; 1993, ch. 72, § 1; 1995, ch. 107, § 1; 2001, ch. 91, § 1; 2005, ch. 83, § 2; 2007, ch. 77, § 3.

Cross-References.

Small Business Investment Act, see 15 USCS 661 et seq.

Notes to Decisions

Lights for Banking Institution.

A purchase of stock in an electric company by a state bank to obtain light in its banking institution did not violate this section. Farmers State Bank v. Richter, 48 N.D. 1233, 189 N.W. 242, 1922 N.D. LEXIS 168 (N.D. 1922).

Protection of Depositors.

This statute was intended primarily for the protection of depositors. Smith v. Rennix, 52 N.D. 935, 52 N.D. 938, 204 N.W. 843, 1925 N.D. LEXIS 154 (N.D. 1925); Jarski v. Farmers' & Merchants' State Bank, 53 N.D. 470, 206 N.W. 773, 1925 N.D. LEXIS 102 (N.D. 1925).

Real Estate Business.

Purchase of lands by state bank for resale at a profit violated this section. Smith v. Rennix, 52 N.D. 935, 52 N.D. 938, 204 N.W. 843, 1925 N.D. LEXIS 154 (N.D. 1925); Jarski v. Farmers' & Merchants' State Bank, 53 N.D. 470, 206 N.W. 773, 1925 N.D. LEXIS 102 (N.D. 1925).

6-03-39. Investment in federal reserve bank stock authorized.

A bank shall have authority to invest such part of its funds in stock of the federal reserve bank of this district as may be necessary to permit the bank to become a member of the federal reserve association, and such stock may be carried as a part of the bank’s assets.

Source: S.L. 1915, ch. 54, § 1; 1925 Supp., § 5187; S.L. 1931, ch. 96, § 33; R.C. 1943, § 6-0339.

6-03-40. Investment in capital stock of certain agricultural credit corporations authorized — Limitations. [Repealed]

Repealed by S.L. 1947, ch. 108, § 1.

6-03-40.1. Liquidation of investments in agricultural credit corporations — Penalty. [Repealed]

Repealed by S.L. 1969, ch. 108, § 1.

6-03-41. Issuance of capital notes or debentures — Not subject to double liability.

With the approval of the commissioner, any banking institution, through action by its board of directors taken at any time and without requiring any action by its stockholders, may issue and sell its capital notes or debentures. All capital notes or debentures are subordinate and subject to the claims of depositors, and at the time of issue may be subordinated and subjected to the claims of other creditors, but in no case may be subject to assessment. The holders of capital notes or debentures as such are not responsible individually for any debts, contracts, or engagements of the issuing institution.

Source: S.L. 1935, ch. 92, § 1; R.C. 1943, § 6-0341.

6-03-42. Capital notes or debentures included in capital — Retirement.

The term “capital” as used in this title embraces the amount of outstanding capital notes and debentures legally issued by any banking institution. The capital stock of a banking institution is unimpaired when the amount of such capital notes and debentures as represented by sound assets exceeds the impairment as found by the commissioner. The commissioner must approve of any retirement of any capital notes or debentures and may require the bank to issue some other form of capital before retiring the capital notes or debentures.

Source: S.L. 1935, ch. 92, § 1; R.C. 1943, § 6-0342; S.L. 1969, ch. 109, § 1.

6-03-43. Preferred stock authorized — Notice to and consent of stockholders.

Any banking institution, with the consent of the commissioner and upon the written consent of all of its stockholders, or by vote of its stockholders owning a majority of the stock of such institution, may issue preferred stock of one or more classes in such amount, upon such conditions and limitations and with such par value as shall be approved by the commissioner. When it is necessary to call a meeting of the stockholders to approve the issuance of preferred stock, the board of directors of the institution shall cause notice of the meeting to be served on each stockholder by registered or certified mail addressed to the stockholder’s last-known post-office address at least sixty days prior to the meeting. After an institution has been authorized to issue preferred stock, its board of directors may make necessary amendments to the articles of incorporation of the institution. Notice to and approval by the stockholders of an institution which has not issued common stock is not required before preferred stock may be issued.

Source: S.L. 1935, ch. 92, § 2; R.C. 1943, § 6-0343.

6-03-44. Preferred stock included in capital — Reduction of common stock.

The preferred stock lawfully issued by a banking institution must be included in determining whether such banking institution has complied with the minimum capital stock requirements provided in this title. Such preferred stock may be used in the capital structure of such institution in the reduction of the common stock or in addition thereto. This section may not be construed as in any manner decreasing the amount of capital required of an institution under the laws of this state.

Source: S.L. 1935, ch. 92, § 3; R.C. 1943, § 6-0344.

6-03-45. Preferred stock — Rights of holders — Nonassessable.

The holders of preferred stock are entitled to all rights and privileges and are subject to all limitations and restrictions with respect to dividends, voting, conversion rights, control of management, retirement and replacement of stock, rights and preferences in case of liquidation, and such other rights or privileges as may be fixed and provided in the articles of incorporation of the issuing institution. Preferred stock is nonassessable, and the holders thereof individually are not responsible as such holders for any debts, contracts, or engagements of the bank.

Source: S.L. 1935, ch. 92, § 5; R.C. 1943, § 6-0345.

6-03-46. Exchange of preferred stock for capital notes or debentures.

Any banking institution, after first obtaining the consent and approval of the commissioner, may exchange its preferred stock for its capital notes or debentures.

Source: S.L. 1935, ch. 92, § 4; R.C. 1943, § 6-0346; S.L. 1969, ch. 110, § 1.

6-03-47. Investment in loans and obligations secured by federal or state government.

Banks, trust companies, the Bank of North Dakota, building and loan associations, insurance companies, and other organizations in this state whose mortgage lending is regulated by law, or that are duly qualified federal housing administration mortgagees, are authorized to make, buy, or sell any loan, advances of credit, and obligations representing loans and advances of credit that are insured or guaranteed, or where there is a commitment to insure or guarantee, in part or in full, or conditionally, by the United States, its instrumentalities, this state, or its instrumentalities.

Source: S.L. 1935, ch. 94, § 1; 1937, ch. 103, § 1; R.C. 1943, § 6-0347; S.L. 1947, ch. 113, § 1; 1957 Supp., § 6-0347; S.L. 1969, ch. 111, § 1; 1971, ch. 107, § 1.

6-03-47.1. Investment in loans secured by federal or state government. [Repealed]

Repealed by S.L. 1969, ch. 112, § 1.

6-03-47.2. Investments of state banks.

In addition to the other powers authorized by law under this title, any state banking association may invest its funds in:

  1. Bonds, notes, or debentures of any corporation that have been rated in one of the four highest rating categories by a nationally recognized statistical rating organization registered with the securities and exchange commission. In the case of different ratings from different rating organizations, the lower rating applies. If a nationally recognized statistical rating organization has not rated the security, the bank shall determine that the security is the credit equivalent of a security rated in the four highest rating categories by a nationally recognized statistical rating organization. This includes documentation demonstrating that the issuer of the security has an adequate capacity to meet financial commitments under the security for the projected life of the asset or exposure and the issuer has adequate capacity to meet financial commitments if the risk of default by the obligor is low and the full and timely repayment of principal and interest is expected. The aggregate par value of investments issued by any one corporation may not exceed twenty-five percent of unimpaired capital and surplus at the time of purchase.
  2. Equity and debt instruments of corporations or projects designed primarily to promote community welfare such as economic rehabilitation and development of low-income areas, subject to approval and regulation of the state banking board but not to exceed for the total of all investments under this subsection, ten percent of the combined capital and surplus of the banking association.
  3. Investments, in either equity or debt instruments or securities, offered by small business investment companies organized and licensed by the Small Business Administration under the Small Business Investment Company Act of 1958 [Pub. L. 85-699; 72 Stat. 689; 15 U.S.C. 661 et seq.], and the Small Business Enhancement Act of 1992 [Pub. L. 102-366; 106 Stat. 1007-1020; 15 U.S.C. 661 et seq.], and any amendments thereto.

Source: S.L. 1973, ch. 68, § 1; 1989, ch. 101, § 1; 1993, ch. 72, § 2; 1997, ch. 78, § 7; 2015, ch. 80, § 5, effective July 1, 2015; 2021, ch. 76, § 9, effective April 13, 2021.

6-03-47.3. Bank investment in investment company shares.

Financial institutions under the jurisdiction of the state banking board may invest in shares of investment companies registered under the Investment Companies Act of 1940 and which invest only in investments otherwise permitted under this chapter. The state banking board may issue rules and regulations governing investments by North Dakota financial institutions in shares of registered investment companies.

Source: S.L. 1987, ch. 107, § 1.

6-03-47.4. Bank investment in federal agricultural mortgage corporation stock.

Financial institutions under the jurisdiction of the state banking board may invest in stock and equity instruments of the federal agricultural mortgage corporation. The state banking board may adopt rules governing investments by North Dakota financial institutions in the stock and equity instruments of the federal agricultural mortgage corporation.

Source: S.L. 1989, ch. 102, § 1.

6-03-48. Investment in notes or bonds secured by insured mortgage — Debentures of federal housing administrator authorized.

Banks, savings banks, trust companies, savings and loan associations, executors, administrators, guardians, trustees, and other fiduciaries, the state of North Dakota and its political subdivisions, institutions, and agencies thereof, and all other persons, associations, and corporations subject to the laws of this state may invest the funds and moneys in their custody or possession eligible for investment in notes or bonds secured by mortgage or deed of trust insured by the federal housing administrator, in debentures issued by the federal housing administrator, and in securities issued by national mortgage associations.

Source: S.L. 1935, ch. 94, § 2; 1937, ch. 103, § 2; R.C. 1943, § 6-0348; S.L. 1983, ch. 319, § 2.

6-03-49. Federal housing administrator — Insured bonds and notes — Debentures — Security for deposits.

Notes and bonds insured and debentures issued by the federal housing administrator are eligible as collateral to secure the deposit of public or other funds, as deposits with any public official or department, and for investment of capital, surplus, reserve, or other funds where such investment is limited to designated securities.

Source: S.L. 1937, ch. 103, § 3; R.C. 1943, § 6-0349.

6-03-49.1. Bank investment in service corporation — Service corporation services and activities.

  1. Subject to the approval of the state banking board, any bank may invest in a service corporation and provide services and activities through the service corporation, if:
    1. The service corporation is a United States corporation and is organized as a bank service corporation having its principal place of business in the United States.
    2. The investment in stocks, bonds, debentures, or other obligations does not exceed ten percent of paid-in and unimpaired capital and unimpaired surplus in each corporation.
    3. The service corporation is operated exclusively for the purpose of providing for such bank and one or more other banks, bank services which the banks would otherwise be required or permitted to provide for on an individual bank basis. The term bank services in this section includes:
      1. Check and deposit sorting and posting.
      2. Computation and posting of interest and other credits and charges.
      3. Preparation and mailing of checks, statements, notices, and similar items.
      4. Any other clerical, bookkeeping, accounting, statistical, or similar functions performed by a bank.
      5. Owning and administering a credit card program for customers of banks.
      6. Engaging in activities incidental to banking services.
      7. Other activities that further or facilitate the corporate purposes of a bank or subsidiaries of a bank, if the services may be lawfully performed by both its national bank shareholders under the laws of the United States and its state bank shareholders under the laws of this state.
  2. Payment for rent earned, goods sold and delivered, or services rendered prior to the making of the payment is not an investment under this subsection. A bank service corporation may not accept deposits.

Source: S.L. 1963, ch. 98, § 1; 1989, ch. 103, § 1; 1997, ch. 82, § 1; 2021, ch. 76, § 10, effective April 13, 2021.

6-03-50. Exceptions from restrictive provisions.

No law of this state requiring security upon which loans or investments may be made, or limiting the making of loans to shareholders or members of the lender, or prescribing the nature, amount or forms of such security, or prescribing or limiting interest rates upon loans or investments, or prescribing or limiting the period for which loans or investments may be made, may be deemed to apply to loans or investments made pursuant to sections 6-03-47, 6-03-48, and 6-03-49.

Source: S.L. 1935, ch. 94, § 3; R.C. 1943, § 6-0350; S.L. 1947, ch. 113, § 2; 1957 Supp., § 6-0350.

6-03-51. Borrowing, normal and emergency — Limitations.

Any state banking association has power to borrow money subject to the limitations of this chapter. Money borrowed from correspondent banks must be evidenced by the promissory note or notes of the borrowing association, and no such association may issue its certificate of deposit for money so borrowed or otherwise conceal the true nature of the transaction. Nothing herein affects the right of a state banking association to receive bona fide deposits from banks or other persons.

Source: S.L. 1925, ch. 92, § 2; 1925 Supp., § 5191a2; S.L. 1931, ch. 96, § 34, subs. b; R.C. 1943, § 06-0351; S.L. 1949, ch. 105, § 1; 1957 Supp., § 6-0351.

6-03-52. Borrowing and rediscounting — Authorization by directors.

No banking association may borrow money, rediscount paper with recourse on it, or pledge securities for money borrowed or rediscounted paper, except in accordance with express authority conferred by resolution of its board of directors indicating the officer or officers who are authorized to borrow, rediscount, and pledge and the extent of their authority. Every such resolution must be entered in the minute book of the association, but a copy of such resolution certified as such by an officer of the association, authenticated by the seal of the association and accepted and acted upon by another bank or other lender in good faith is conclusive evidence of the existence and terms of the resolution.

Source: S.L. 1925, ch. 92, § 5; 1925 Supp., § 5191a5; S.L. 1931, ch. 96, § 34; subs. c; R.C. 1943, § 6-0352; S.L. 1949, ch. 105, § 2; 1957 Supp., § 6-0352.

6-03-53. Borrowing and rediscounting — Report required.

Whenever a state banking association borrows money or rediscounts with recourse such association shall immediately make a full written report of the transaction to the commissioner upon the commissioner’s request, which report must include a full description of all collateral security given or to be given by such association for the credit obtained.

Source: S.L. 1925, ch. 92, § 4; 1925 Supp., § 5191a4; S.L. 1931, ch. 96, § 34, subs. d; R.C. 1943, § 6-0353; S.L. 1949, ch. 105, § 3; 1957 Supp., § 6-0353; S.L. 1993, ch. 73, § 1.

6-03-54. Pledge — Ratio to assets.

It is unlawful for any state banking association to pledge or hypothecate more than one and one-half dollars of the face value of any of its assets for each one dollar of money borrowed, except with written authority from the commissioner.

Source: S.L. 1925, ch. 92, § 3; 1925 Supp., § 5191a3; S.L. 1931, ch. 96, § 34, subs. e; R.C. 1943, § 6-0354; S.L. 1949, ch. 105, § 4; 1957 Supp., § 6-0354.

6-03-54.1. Pledges of bank securities to secure repayment of deposits by a federally recognized Indian tribe.

A bank, upon the deposit with it of funds by a federally recognized Indian tribe, or an officer, employee, or agent thereof in that person’s official capacity, may give security for the safekeeping and repayment of the funds deposited by a pledge of securities of the same kind and to the same extent as is authorized by section 21-04-09 in the case of deposits of public funds by public corporations.

Source: S.L. 1997, ch. 83, § 1.

6-03-55. Powers of pledgee of bank assets.

Holders of pledged or hypothecated notes or other evidences of indebtedness pledged by state banking associations have the right to collect and enforce payment, and to renew or extend the time of payment thereof for a period not longer than fifteen months, if no endorser, guarantor, or joint maker would be released by such renewal or extension. Such holders also have the right:

  1. To accept from the makers of such pledged or hypothecated notes or other evidences of debt, security, or additional security for the payment thereof.
  2. To execute and give discharges and releases of instruments and securities to the maker upon payment in full thereof.
  3. To sell, assign, and transfer any note with the security pledged therefor.

The pledgee is entitled to be reimbursed from the pledged assets, or from the proceeds of the sale thereof, for the reasonable and necessary expenses incurred and expended in collecting, renewing, securing, and otherwise protecting the assets pledged or hypothecated to the pledgee.

Source: S.L. 1925, ch. 92, § 6; 1925 Supp., § 5191a6; S.L. 1931, ch. 96, § 34; subs. f; R.C. 1943, § 6-0355.

6-03-56. Unlawful borrowing, rediscounting, endorsing, pledging by officers, employees, and accessories — Penalty.

Any officer, director, agent, or employee of any state banking association who borrows money for, or on behalf or in the name of such association or obligates any such association upon rediscounted paper, or pledges any of the assets of such association in violation of the provisions of this chapter is guilty of a class A misdemeanor and is personally liable to the association for any loss it sustains on account of such illegal action, but no such violation may affect the validity of any loan, endorsement, or pledge in the hands of any federal reserve bank or federal lending agency or commercial bank correspondent who loaned money to the association or discounted its paper in good faith and in reliance upon a certified copy of a resolution complying with section 6-03-52.

Source: S.L. 1925, ch. 92, § 11; 1925 Supp., § 5191a11; S.L. 1931, ch. 96, § 34, subs. i; R.C. 1943, § 6-0356; S.L. 1949, ch. 105, § 5; 1957 Supp., § 6-0356; S.L. 1975, ch. 106, § 44.

6-03-57. Foreclosure of pledge contracts.

Except as otherwise provided in chapter 6-07.2, no pledge made by an association may be foreclosed except by an action in equity brought in the district court of the county in which the pledgor association is located, except where assets are pledged by a state banking association in order to secure borrowed money or the obligation of the association on rediscounted paper, the rights of the pledgee must be determined by the terms of the agreement of pledge, and if the pledged assets are outside of this state, the foreclosure of the pledge is governed by the laws of the state where the pledge is located.

Source: S.L. 1925, ch. 92, § 7; 1925 Supp., § 5191a7; S.L. 1931, ch. 96, § 34, subs. g1; R.C. 1943, § 6-0357; S.L. 1949, ch. 105, § 6; 1957 Supp., § 6-0357; S.L. 1991, ch. 87, § 1; 2021, ch. 77, § 5, effective August 1, 2021.

6-03-58. Unlawful rediscounts, borrowings, and pledgings.

It is unlawful for any state banking association, either directly or indirectly, to make any rediscount or contract to borrow money, nor may it borrow money, nor pledge or hypothecate, nor contract to pledge or hypothecate, any of its assets except in accordance with the provisions of this chapter.

Source: S.L. 1925, ch. 92, §§ 1, 10; 1925 Supp., §§ 5191a1, 5191a10; S.L. 1931, ch. 96, § 34, subs. a; R.C. 1943, § 6-0358; S.L. 1949, ch. 105, § 7; 1957 Supp., § 6-0358.

6-03-59. Loan limitation to one borrower or concern.

The total direct, indirect, or contingent liability of any borrower to any state banking association shall not exceed at any time twenty-five percent of the association’s tier 1 capital as of the most recent report of condition and income. For the purpose of this section, the total liability of a borrower includes the liabilities of any separate borrowers for which the repayment of separate loans or extensions of credit is substantially from the same source and any credit exposure to a borrower arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the state banking association and the borrower.

Source: S.L. 1890, ch. 23, § 22; 1893, ch. 27, § 22; R.C. 1895, § 3247; R.C. 1899, § 3247; S.L. 1905, ch. 165, § 23; R.C. 1905, § 4657; S.L. 1909, ch. 45, § 1; C.L. 1913, § 5172; S.L. 1927, ch. 95, § 1; 1931, ch. 96, § 35; 1943, ch. 88, § 5; R.C. 1943, § 6-0359; S.L. 1961, ch. 108, § 1; 1965, ch. 88, § 1; 1979, ch. 126, § 1; 1985, ch. 124, § 1; 2005, ch. 83, § 3; 2011, ch. 76, § 5.

Cross-References.

Assessment of civil money penalties, see § 6-01-04.3.

Notes to Decisions

Breach of Contract.

A contract on the part of a state bank to make a loan to an individual in excess of the limit authorized by this section was illegal, and an alleged breach thereof furnished no basis for a cause of action. Wald v. Wheelon, 27 N.D. 624, 147 N.W. 402, 1914 N.D. LEXIS 81 (N.D. 1914).

Concealment.

A contract between two banking associations to enable one to make loans in excess of the legal limit and to conceal such fact from the state banking authorities is illegal and contrary to public policy. Oakes Nat'l Bank v. Farmers' State Bank, 52 N.D. 49, 201 N.W. 696, 1924 N.D. LEXIS 103 (N.D. 1924).

No Private Right of Action.

There is no private right of action against a bank by a creditor of the bank’s customer under this section. Hellman v. Thiele, 413 N.W.2d 321, 1987 N.D. LEXIS 400 (N.D. 1987).

6-03-59.1. Leasing of personal property — Limitation on term and amount.

A bank may become the owner and lessor of personal property upon the specific request of and for the use of a customer. The term of the lease may not exceed twenty years and all such leases must provide for the payment of at least annual rentals, the total of which must at least equal the cost to the bank of the personal property so leased. The total leasing obligation or rentals to a bank will be a part of the total liability limitations of any borrower as set forth in section 6-03-59.

Source: S.L. 1969, ch. 472, § 1; 1973, ch. 69, § 1; 1975, ch. 69, § 1.

Cross-References.

Assessment of civil money penalties, see § 6-01-04.3.

6-03-59.2. Lease financing of public facilities.

A state-chartered bank may purchase or construct a municipal building, school building, or other similar public facility and, as holder of legal title, lease the facility to a municipality or other public authority having resources sufficient to make all rental payments as they become due. The lease agreement must provide that the lessee will become the owner of the building or facility upon the expiration of the lease. All leases provided in accordance with this section must be subject to the bank’s legal lending limit.

Source: S.L. 2013, ch. 77, § 18.

Effective Date.

This section became effective August 1, 2013.

6-03-60. Loans to and purchases from directors, executive officers, and principal shareholders — Restrictions — Conditions — Penalty — Civil liability.

At no time may any combination of loans or extensions of credit or both made by a state banking association to an officer of that association exceed the limitation on loans to one person or concern specified in section 6-03-59, federal law, or federal rule.

No director, officer, or employee of a bank shall sell to such bank, directly or indirectly, any mortgage, bond, note, stock, or other property whatsoever without first obtaining the written approval of the board of directors. The action of the board of directors in connection with the loans and discounts required under this section shall be made a matter of permanent record in the minute books of the banking association. Any shareholder, officer, or director of any banking association who knowingly shall violate the provisions of this section shall be held liable in the person’s personal and individual capacity for all loss or damage which the association or any person shall sustain in consequence thereof and shall be guilty of a class B misdemeanor. The commissioner may require, at any time, the payment or repurchase of loans, securities, or obligations herein referred to.

Source: S.L. 1911, ch. 53, § 1; C.L. 1913, § 5192; S.L. 1931, ch. 96, § 36; R.C. 1943, § 6-0360; S.L. 1969, ch. 113, § 1; 1975, ch. 70, § 1; 1979, ch. 127, § 1; 1981, ch. 111, § 1; 1983, ch. 111, § 1; 1995, ch. 85, § 3.

Cross-References.

Assessment of civil money penalties, see § 6-01-04.3.

6-03-61. Excessive loan — Validity — Penalty — Personal liability.

Whenever a state banking association allows any person, copartnership, or corporation to become indebted to it, directly or indirectly, in excess of the amount, exclusive of interest, permitted by this title, the officer, director, or employee thereof willfully permitting or approving such loan is guilty of a class B misdemeanor, and in addition thereto, is liable personally to the association for the amount of such loan in excess of the statutory limit. Unauthorized loans, however, are not invalid.

Source: Pen. C. 1877, §§ 643, 644; R.C. 1895, §§ 7518, 7518; S.L. 1897, ch. 32, § 1; R.C. 1899, §§ 7518, 7519; R.C. 1905, §§ 9277, 9278; S.L. 1911, ch. 53; C.L. 1913, §§ 5192, 10006, 10007; S.L. 1931, ch. 96, §§ 37, 38; R.C. 1943, § 6-0361; S.L. 1975, ch. 106, § 45.

Notes to Decisions

Breach of Contract.

A bank is not liable for a breach of contract to loan one individual an excessive sum of money so long as such contract is illegal. Wald v. Wheelon, 27 N.D. 624, 147 N.W. 402, 1914 N.D. LEXIS 81 (N.D. 1914).

6-03-62. Interest on loans — Rate.

An association may demand and receive for loans on personal security, or for discounting notes, bills, or other evidences of debt, such rate of interest as may be agreed upon, not exceeding the amount authorized by law to be contracted for, and it may receive such interest according to the ordinary usage of banking associations and for not more than one year in advance.

Source: S.L. 1890, ch. 23, § 16; 1893, ch. 27, § 16; R.C. 1895, § 3241; R.C. 1899, § 3241; S.L. 1905, ch. 165, § 17; R.C. 1905, § 4651; C.L. 1913, § 5166; S.L. 1931, ch. 96, § 39; R.C. 1943, § 6-0362.

Cross-References.

Interest on loans may be deducted in advance — limitation, see § 47-14-08.

Notes to Decisions

Advance Interest.

The taking of interest on a loan in advance is not usury. Sundahl v. First State Bank, 32 N.D. 373, 155 N.W. 794, 1916 N.D. LEXIS 122 (N.D. 1916).

6-03-63. Interest on deposits — Rates payable — Penalty.

No state banking association may pay interest on deposits, directly or indirectly, at rates greater than authorized by the state banking board. The board’s authorization of interest rates is not subject to the public notice and public hearing requirements of chapter 28-32. Any officer, director, or employee of any association violating the provisions of this section, directly or indirectly, is guilty of a class B misdemeanor.

Source: S.L. 1931, ch. 96, § 40; R.C. 1943, § 6-0363; S.L. 1975, ch. 71, § 1; 1981, ch. 106, § 2; 1991, ch. 81, § 6.

Notes to Decisions

Trust Company.

This section was applicable to trust company organized under chapter 6-05. State v. Hart, 162 N.W.2d 499, 1968 N.D. LEXIS 75 (N.D. 1968).

6-03-64. Payment of deposits made by fiduciaries, officers, minors, and associations.

Deposits made by a person as executor, administrator, guardian, conservator, or in any other representative capacity or official position, with a bank, are payable to that person in such capacity, or if made to an account upon which a minor may order payments as an account owner, may be paid to the minor although the minor has no guardian or conservator or if the minor has a guardian or conservator, it is not necessary to obtain the consent of the guardian or conservator to such payment, but a payment order or receipt or acquittance authorized by the minor is valid and binding. Deposits made by a corporation, association, or society are payable to any person authorized by its board of directors or trustees to receive the same.

Source: S.L. 1911, ch. 56, § 8; C.L. 1913, § 5200; S.L. 1931, ch. 96, § 42; R.C. 1043, § 6-0364; S.L. 1973, ch. 257, § 2; 2009, ch. 98, § 1.

6-03-65. Deposit in trust — To whom paid.

Whenever any deposit is made with any banking association by any person in trust for another and no other or further notice of the existence and terms of a legal and valid trust has been given in writing to the bank, in the event of the death of the trustee, the deposit, or any part thereof, together with the dividends or interest thereon, may be paid to the person for whom the deposit was made.

Source: S.L. 1919, ch. 111, § 1; 1925, Supp., § 5220a3; S.L. 1931, ch. 96, § 43; R.C. 1943, § 6-0365.

6-03-66. Deposit in two or more names — To whom paid. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

6-03-67. Appropriation of deposits unlawful — Exception — Liability therefor.

Except as provided in sections 6-07.2-09 and 30.1-31-20, it is unlawful for any banking association to charge any claim which it might have, or the claim of any other person, against a deposit made with the association, or to appropriate a deposit or any part of the deposit to the payment of any debt to the association, without legal process or the consent of the depositor. Any banking association that violates this section is liable to the party aggrieved for any damages caused by the violation.

Source: S.L. 1923, ch. 139, §§ 1, 2; 1925 Supp., §§ 5220a1, 5220a2; S.L. 1931, ch. 96, § 41, subs. a, b; R.C. 1943, § 6-0367; S.L. 1973, ch. 257, § 3; 1987, ch. 108, § 1; 1991, ch. 351, § 1; 2021, ch. 77, § 6, effective August 1, 2021.

Notes to Decisions

Agreement on Signature Card.

While statute applies to national banks as well, if depositor signed signature card authorizing bank to offset any debt to bank against account, mere fact that consent was in smaller print than balance of card or that depositor may not have read card and may not have known of consent to setoff was no defense. Biby v. Union Nat'l Bank, 162 N.W.2d 370, 1968 N.D. LEXIS 78 (N.D. 1968).

Debt Due from Depositor.

A bank cannot charge against the deposit, a debt due it from the depositor, or appropriate the deposit for the purpose of paying a debt without “legal process”. First Int'l Bank v. Brehmer, 56 N.D. 81, 215 N.W. 918, 1927 N.D. LEXIS 73 (N.D. 1927).

Receiver of Closed Bank.

The application by the receiver of a closed bank of a deposit upon notes due the bank from a depositor, without the consent of the depositor or resort to legal process, does not interrupt the running of the statute of limitations against the notes. Baird v. Utecht, 67 N.D. 491, 274 N.W. 513, 1937 N.D. LEXIS 104 (N.D. 1937).

Setoffs.

Setoffs are forbidden except for those pursuant to judicial process or with the consent of the depositor. In re Knudson, 929 F.2d 1280, 1991 U.S. App. LEXIS 5582 (8th Cir. N.D. 1991).

6-03-67.1. Operation without federal deposit insurance prohibited — Liability — Penalty.

No state banking association shall, after July 1, 1978, engage in the business of banking without securing and continuing in force federal deposit insurance corporation insurance of deposits. Any officer or director of any state banking association who violates this section is guilty of a class A misdemeanor and shall be personally liable to any person aggrieved for any damages caused by the violation.

Source: S.L. 1977, ch. 67, § 4.

Cross-References.

Proof of federal deposit insurance required before certificate of authority will be delivered, see § 6-02-03.

6-03-68. Collection of negotiable instruments by bank — Liability for negligence. [Repealed]

Repealed by S.L. 1965, ch. 296, § 32.

6-03-68.1. Settlement of check presented by or through federal reserve bank or Bank of North Dakota.

Except as to any check sent to it as a special collection item, no bank may settle any check drawn on it otherwise than at par when such check is presented by or through a federal reserve bank or the Bank of North Dakota.

Source: S.L. 1969, ch. 114, § 1.

6-03-69. Report of examining committee.

The board of directors shall submit to the commissioner a report of the examining committee on forms provided by the commissioner. The report must reflect the results of a careful and thorough examination of the assets of the bank, including loans and discounts of every nature and the securities and collaterals belonging to the bank. The valuation of the assets of the bank must be compared with the records of the bank. The report must be made a part of the minutes of a regular meeting of the board of directors. The commissioner may refuse to accept the report if found to be not in accordance with acceptable accounting principles.

Any of the following methods may be used to conduct the examination required by this section:

  1. Examination by the board of directors or its examining committee. When this method is employed, the examination must be conducted and the report submitted in July of each year.
  2. Examination on an annual basis by an independent certified public accountant or firms composed of such accountants, or auditors of the bank’s holding company, if any.
  3. Examination by an autonomous internal audit control system. The individual directing the internal audit control system shall submit to the board of directors each quarter an interim report as to the degree of compliance with the internal audit control system and shall express an opinion as to the adequacy of the internal controls. A complete report must be submitted annually to the board of directors.

Source: S.L. 1893, ch. 27, § 32; R.C. 1895, § 3257; R.C. 1899, § 3257; S.L. 1905, ch. 165, § 33; R.C. 1905, § 4667; C.L. 1913, § 5182; S.L. 1931, ch. 96, § 27; R.C. 1943, § 6-0369; S.L. 1981, ch. 112, § 1; 1989, ch. 98, § 2; 1997, ch. 78, § 8.

6-03-70. Reports — Regular and special — Publication — Penalty.

Every state banking association shall respond to calls each year, the number to be determined by the commissioner. The commissioner shall prescribe the forms for such reports which must be the same forms as those for similar reports called by the federal deposit insurance corporation. The reports must exhibit in detail, under appropriate headings, the resources and liabilities of the association at the close of business on a past day specified by the commissioner, which must be the same day on which similar reports are required by the federal deposit insurance corporation. Each report must be verified by the oath of the president or the cashier and attested as correct by at least two of the directors and must be transmitted to the commissioner within thirty days after receipt of the request for the same. The commissioner may request an amended call for reports filed in error and may require republication of the call report containing material errors. At the discretion of the commissioner, a call may be complied with by submission of a photocopy of the call report submitted to the federal deposit insurance corporation or federal reserve bank or a printout retrieved from computer facilities in the department of financial institutions and connected to those of the federal deposit insurance corporation. The commissioner may call for a special report from any association whenever in the commissioner’s judgment the same is necessary to obtain complete knowledge of the condition of the association. Every association which fails to make and transmit any report required by this section shall forfeit and pay to the state treasurer for deposit in the financial institutions regulatory fund a penalty of two hundred dollars for each delinquency. The commissioner may waive the penalty for reports filed late, not exceeding three business days beyond the due date required by this section.

Source: S.L. 1890, ch. 23, § 17; 1893, ch. 27, § 17; R.C. 1895, § 3242; S.L. 1897, ch. 31; R.C. 1899, § 3242; S.L. 1905, ch. 165, § 18; R.C. 1905, § 4652; C.L. 1913, § 5167; S.L. 1925, ch. 94, § 1; 1925 Supp., § 5167; S.L. 1927, ch. 94, § 1; 1931, ch. 96, § 28; R.C. 1943, § 6-0370; S.L. 1979, ch. 128, § 1; 1981, ch. 113, § 1; 1987, ch. 109, § 1; 1989, ch. 96, § 5; 1995, ch. 86, § 1; 2001, ch. 88, § 14.

Cross-References.

Assessment of civil money penalties, see § 6-01-04.3.

6-03-71. Bonds of officers and employees.

All officers and employees of any state banking association, before entering upon their duties, shall furnish a bond to the association in the sum and upon the conditions as required by the board of directors in keeping with rules established by the state banking board. All bonds must be approved by the board of directors of the association and are subject to the approval of the commissioner. A record of the approval of the bonds by the board of directors of the association must be made on the records of the bank, and the bonds must be filed with the commissioner. Stockholders of the banks are not eligible as bondsmen for the officers.

Source: S.L. 1893, ch. 27, § 31; R.C. 1895, § 3256; S.L. 1897, ch. 31; R.C. 1899, § 3256; S.L. 1905, ch. 165, § 32; R.C. 1905, § 4666; C.L. 1913, § 5181; S.L. 1931, ch. 96, § 29, subs. b; R.C. 1943, § 6-0371; 1997, ch. 78, § 9.

Notes to Decisions

Amount of Bond.

This section is a specific requirement that a bond must be furnished, adequate in the circumstances, by the bank’s officers and employees. McIntosh v. Dakota Trust Co., 52 N.D. 752, 204 N.W. 818, 1925 N.D. LEXIS 146 (N.D. 1925).

President of Bank.

A good and sufficient bond must be furnished by president of bank. Peterson v. Baird, 63 N.D. 604, 249 N.W. 690, 1933 N.D. LEXIS 212 (N.D. 1933).

6-03-72. Certification of checks, drafts, and orders — Penalty.

It is unlawful for an officer, clerk, or agent of any state banking association to certify any check, draft, or order drawn upon the association unless the person drawing the same has on deposit with the association at the time of such certification an amount of money equal to the amount specified therein, and upon such certification, the amount of such certified check, draft, or order must be immediately charged against the account of such drawer. Any officer or employee of any banking association who willfully violates the provisions of this section is guilty of a class B misdemeanor.

Source: S.L. 1931, ch. 96, § 60; R.C. 1943, § 6-0372; S.L. 1975, ch. 106, § 46.

6-03-73. Deferred posting authorized. [Repealed]

Repealed by S.L. 1965, ch. 296, § 32.

6-03-74. Definitions. [Repealed]

Repealed by S.L. 1965, ch. 296, § 32.

6-03-75. Varied by agreement. [Repealed]

Repealed by omission from this code.

6-03-76. Records search reimbursement. [Effective through August 31, 2022]

Any financial institution authorized to do business in this state must be reimbursed as follows for all records searches done at the request of any state agency or any branch of the state government except the department of human services. Further, any federal agency or any branch of the federal government must also make such reimbursement if authorized to do so:

  1. For search and processing time at the rate of thirty dollars per hour per person, computed on the basis of seven dollars and fifty cents per quarter hour, limited to the total amount of personnel time spent in locating, retrieving, reproducing, packaging, and preparing for shipment documents or information requested.
  2. For making copies of duplicates of required or requested documents at the rate of fifteen cents per page.
  3. For making copies of photographs, films, and other materials at the actual cost incurred by the financial institution.

The financial institution must be reimbursed for all actual mailing or transportation expenses incurred in conveying the requested or required materials to the requesting agency. The reimbursement provisions of this section shall not apply to standard confirmations.

Source: S.L. 1981, ch. 114, § 1; 2007, ch. 84, § 1.

6-03-76. Records search reimbursement. [Effective September 1, 2022]

Any financial institution authorized to do business in this state must be reimbursed as follows for all records searches done at the request of any state agency or any branch of the state government except the department of health and human services. Further, any federal agency or any branch of the federal government must also make such reimbursement if authorized to do so:

  1. For search and processing time at the rate of thirty dollars per hour per person, computed on the basis of seven dollars and fifty cents per quarter hour, limited to the total amount of personnel time spent in locating, retrieving, reproducing, packaging, and preparing for shipment documents or information requested.
  2. For making copies of duplicates of required or requested documents at the rate of fifteen cents per page.
  3. For making copies of photographs, films, and other materials at the actual cost incurred by the financial institution.

The financial institution must be reimbursed for all actual mailing or transportation expenses incurred in conveying the requested or required materials to the requesting agency. The reimbursement provisions of this section shall not apply to standard confirmations.

Source: S.L. 1981, ch. 114, § 1; 2007, ch. 84, § 1; 2021, ch. 352, § 3, effective September 1, 2022.

CHAPTER 6-04 Savings Banks [Repealed]

[Repealed by S.L. 1969, ch. 115, § 1]

CHAPTER 6-05 Annuity, Safe Deposit, Surety, and Trust Companies

6-05-01. Who may form — Corporation has perpetual existence.

Any number of persons, not less than nine, at least three of whom must be residents of this state, may associate themselves and form a corporation for the purpose of transacting business as an annuity, safe deposit, and trust company. Its existence shall be perpetual.

At the time and place stated, and through any sources of information at its command, the board shall examine and consider all relevant factors, including whether the place where such company is proposed to be located is in need of a further annuity, safe deposit, and trust company, whether the proposed institution is adapted to the filling of such need, and whether the proposed incorporators are possessed of such character, integrity, reputation, and financial standing as shown by a detailed financial statement to be furnished by them, that their connection with the company will be beneficial to the public welfare of the community in which such company is proposed to be established. The board shall hear any reasons advanced by the applicants why they should be permitted to organize the proposed institution and any reasons advanced by any person why such institution should not be permitted to be organized. At the termination of such hearing, the board shall make a brief statement in writing of its conclusions, and if it finds that the proposed institution should not be permitted to organize, it shall state briefly the reasons why. A copy of such conclusions either shall be endorsed upon or attached to the organization certificate, together with the refusal or grant of permission to the proposed incorporators to present the said organization certificate to the secretary of state. A determination in favor of such organization must be joined in by a majority of the members of the board.

Any banking association organized under chapter 6-02 may apply to the board for an order authorizing the applicant to exercise fiduciary powers. If the determination of the board is in favor of the applicant, the board shall make its order authorizing the applicant to engage in the business of a trust company upon its showing full compliance with sections 6-05-03, 6-05-04, and 6-05-05 except the capital stock of the banking association shall not be required to be divided in shares of one hundred dollars each as provided by section 6-05-03. Sections 6-05-06 and 6-05-07 are not applicable to banking associations granted authority to engage in the business of a trust company by the board. Thereafter, such banking association must be subject to the jurisdiction of the board as to its trust company operations the same as trust companies organized under chapter 6-05.

Any corporation organized and authorized to transact the business of fidelity insurance and corporate suretyship prior to July 1, 1983, pursuant to the former sections 6-05-08 and 6-05-19 through 6-05-24 and sections 6-05-30 through 6-05-33 may continue to operate under the provisions of those sections as they existed on June 30, 1983.

Source: S.L. 1897, ch. 142, § 1; R.C. 1899, § 3258a; R.C. 1905, § 4677; C.L. 1913, § 5205; S.L. 1923, ch. 183, § 1; 1925 Supp., § 5205; S.L. 1931, ch. 93, § 1, subs. A; R.C. 1943, § 6-0501; S.L. 1963, ch. 93, § 3; 1965, ch. 84, § 3; 1983, ch. 319, § 3; 1991, ch. 82, § 3; 1993, ch. 67, § 3; 1995, ch. 87, § 1.

Notes to Decisions

“Banking Institutions” But Not “Banking Associations”.

This section and the remaining sections in this chapter provide for the organization, powers, management and regulation of annuity, safe deposit, surety and trust companies which come within the definition of “banking institutions” but not “banking associations” as provided in N.D.C.C. § 6-01-02. Nelson v. Dakota Bankers Trust Co., 132 N.W.2d 903, 1964 N.D. LEXIS 154 (N.D. 1964).

Rate of Interest on Deposits.

Section 6-03-63 governing rate of interest that may be paid on deposits by banking associations is applicable to trust company organized under chapter 6-05. State v. Hart, 162 N.W.2d 499, 1968 N.D. LEXIS 75 (N.D. 1968).

6-05-02. Compliance with chapter required — Penalty for noncompliance.

No person, firm, company, copartnership, or corporation, either domestic or foreign, not organized under this chapter nor subject to its provisions, except only national banking corporations, state banks authorized under this chapter, state banks or trust companies authorized to engage in trust activities under the laws of another state, their affiliates, bona fide banking institution trade associations and their affiliates, and the Bank of North Dakota, may make use of or display in connection with its business, in signs, letterheads, advertising, or in any other way, such words as “trust”, “trust company”, or any other word or words of like import, nor may any person or concern do or perform anything in the nature of the business of a trust company until and unless such business is regularly organized and authorized under this chapter. If any firm or corporation organized prior to July 1, 1931, has been granted a charter permitting it to use any word, words, or title contrary to the intent of this section, and by reason of its rights under such charter, the provisions of this section may not be enforced against it during the life of such charter. However, no renewal charter may be granted to such person, firm, or corporation permitting the continuance of the use of such word, words, or title contrary to or in violation of this section. Any person, firm, or corporation which, by reason of an existing charter right under any law or statute in effect prior to July 1, 1931, may be held by the courts not to be affected by this section and which therefore refuses to comply with the provisions of this section, during the period of noncompliance, shall display, prominently and continuously in plain, legible, and clearly discernible lettering on all of its signs, stationery, circulars, and advertising, and in all of its printed or written matter the following words and language: “NOT UNDER THE SUPERVISION OF THE STATE BANKING BOARD OR THE COMMISSIONER OF FINANCIAL INSTITUTIONS”, and such language must be displayed thereon as prominently as any other matter therein. Any person, firm, company, copartnership, or corporation, domestic or foreign, violating any provision of this section, shall forfeit to the state one hundred dollars for every day or part thereof during which such violation continues. In an action brought by the commissioner or any aggrieved person, the court may issue an injunction restraining such person, firm, company, copartnership, or corporation from further using such words, terms, or phrases in violation of this section or from further transacting business in such a way or manner as to lead the public to believe that its business is in whole or in part of the nature of a trust company, or that it is under the supervision of the state banking board or the commissioner. Upon written request, the commissioner may grant an exemption to this section if the commissioner finds that use of the words “trust” or “trust company”, or words of like import, are not reasonably likely to cause confusion or lead the public to believe that the person requesting the exemption is a trust company, banking institution trade association, or affiliate authorized under this section or is conducting a business subject to the jurisdiction of the department. In granting an exemption under this section, the commissioner may restrict or condition the exemption and use of the name or word or the activities of an exempt person as the commissioner considers appropriate to protect the public interest.

Source: S.L. 1931, ch. 93, § 1, subs. C; R.C. 1943, § 6-0502; S.L. 1963, ch. 93, § 4; 2001, ch. 88, § 15; 2005, ch. 81, § 2; 2007, ch. 81, § 2.

6-05-03. Capital required.

The amount of capital of any such corporation may not be less than one million dollars, with no less than five hundred thousand dollars of that amount in liquid assets. The state banking board may require such additional capital, surplus, and undivided profits as it may determine necessary to properly serve the area and to protect the public interests. The state banking board shall take into consideration peer group ratios, or federal standards and guidelines, when determining whether any additional capital is required.

Source: S.L. 1897, ch. 142, §§ 3, 4; R.C. 1899, § 3258b; R.C. 1905, § 4678; C.L. 1913, § 5206; S.L. 1929, ch. 250, § 1; 1931, ch. 93, § 2; R.C. 1943, § 6-0503; S.L. 1991, ch. 82, § 4; 2019, ch. 123, § 2, effective July 1, 2019.

6-05-04. Surety deposit investments required — Securities in which investment may be made.

Every corporation organized under this chapter and every foreign corporation before engaging in similar comparable activities within this state shall either deposit with any federal reserve bank, the Bank of North Dakota, or any other custodian approved by the commissioner, securities as provided by this section or pledge a certificate of deposit as provided by this section. The deposit or pledge may not be less than fifty thousand dollars or less than one-sixth of the par value of the capital stock of the corporation, whichever is the greater. However, a corporation is not required to deposit or pledge more than five hundred thousand dollars. The deposit certificate or pledge agreement must authorize the commissioner to cause the deposit, in part or in whole, to be transferred to the commissioner upon the commissioner’s demand. An original of the deposit certificate or pledge must be furnished to the commissioner. The deposit or pledge must be:

  1. Bonds of the United States or of this state;
  2. Bonds of other states which have the approval of the commissioner of financial institutions;
  3. Bonds or obligations of any township, school district, city, or county within this state, whose total bonded indebtedness does not exceed five percent of the then assessed valuation thereof;
  4. Bonds or promissory notes secured by first mortgages or deeds of trust upon unencumbered real estate situated within the state of North Dakota worth two and one-half times the amount of the obligation so secured;
  5. Obligations issued, assumed, or guaranteed by the international bank for reconstruction and development or the African development bank;
  6. United States treasury bills or notes of an agency thereof;
  7. Certificates of deposit fully insured by the federal deposit insurance corporation from banks located within this state; or
  8. Certificates of deposit issued by the Bank of North Dakota.

Source: S.L. 1897, ch. 142, § 4; R.C. 1899, § 3258b; R.C. 1905, § 4678; C.L. 1913, § 5206; S.L. 1929, ch. 250, § 1; 1931, ch. 93, § 2; R.C. 1943, § 6-0504; S.L. 1949, ch. 107, § 1; 1957 Supp., § 6-0504; S.L. 1969, ch. 116, § 1; 1975, ch. 72, § 1; 1983, ch. 319, § 4; 1989, ch. 104, § 1; 1989, ch. 113, § 2; 1995, ch. 87, § 2; 1997, ch. 84, § 1; 2001, ch. 88, § 16.

6-05-04.1. Right of action against deposit.

The security deposited with the department of financial institutions as provided in section 6-05-04 must be held by the department of financial institutions for the benefit of any person making any transfer or deposit of money or property in the state of North Dakota to or with any trust company and who suffers loss or damage because of the breach of any trust committed by such trust company. Any judgment obtained by any such person from any court of competent jurisdiction may be satisfied from the security deposited with the department of financial institutions.

Source: S.L. 1969, ch. 116, § 2; 2013, ch. 77, § 19.

6-05-05. Certificate of deposit.

Whenever any such corporation assigns, transfers, and delivers to the commissioner, or a designated agent, the securities described in section 6-05-04 and all evidences of such investment, the commissioner, or a designated agent, shall execute and deliver to the corporation a certificate of such deposit, and thereupon, the said corporation may commence and carry on business under the provisions of this chapter. The commissioner, or a designated agent, shall hold the said securities so deposited with the commissioner or agent as collateral security for the depositors and creditors of the corporation, and for the faithful execution of any trusts which may be imposed lawfully upon and accepted by such corporation. The corporation from time to time may withdraw the said securities or any part thereof from the commissioner, or a designated agent, upon depositing with the commissioner or agent other securities of equal amount and value and of the kinds specified in section 6-05-04. Until otherwise ordered by a court of competent jurisdiction, the said commissioner, or a designated agent, shall pay over to such corporation the interest and dividends which the commissioner or agent collects upon such securities. Any corporation having a larger deposit with the commissioner, or a designated agent, than is required by this chapter must be allowed at any time to withdraw its excess deposit.

Source: S.L. 1897, ch. 142, § 5; R.C. 1899, § 3258c; S.L. 1903, ch. 202, § 1; R.C. 1905, § 4679; C.L. 1913, § 5207; R.C. 1943, § 6-0505; S.L. 1989, ch. 113, § 3.

Notes to Decisions

Investigation of Sureties.

The public service commission may inquire into the reliability and business conduct of sureties on a bond given by a grain warehouseman. State ex rel. Dakota Trust Co. v. Stutsman, 24 N.D. 68, 139 N.W. 83, 1912 N.D. LEXIS 16 (N.D. 1912).

6-05-06. Directors — Qualifications — Terms — Vacancies.

All the corporate powers of such a corporation must be exercised by a board of directors of not less than three nor more than twenty-five in number, and such officers and agents as it elects or appoints. At least two-thirds of the directors must be citizens of the United States. Any director who becomes in any manner disqualified shall vacate that director’s office thereupon. Every director, when elected or appointed, shall take the oath specified in section 6-03-04. Such oath, subscribed by the director making it and certified by the officer before whom it was taken, must be transmitted at once to the commissioner to be filed in the commissioner’s office. The articles of incorporation must state the names and residences of the first board of directors, of whom the first named one-third shall serve for a period of three years, the second one-third named for a period of two years, and the balance thereof shall serve for a period of one year from the date fixed for the commencement of such corporation. In case any of the persons so named shall fail or refuse to qualify from any cause, the directors who qualify must elect qualified persons to fill such vacancies, and thereafter, at each annual meeting of the stockholders, directors must be elected to serve three years in place of those whose terms then expire.

Source: S.L. 1897, ch. 142, § 6; R.C. 1899, § 3258d; R.C. 1905, § 4680; C.L. 1913, § 5208; S.L. 1931, ch. 93, § 3; R.C. 1943, § 6-0506; S.L. 1981, ch. 110, § 4; 1987, ch. 73, § 1; 1987, ch. 110, § 1; 2017, ch. 73, § 2, effective August 1, 2017.

6-05-07. Election of directors — Appointment and bonds of officers.

An annual election must be held at the principal office or place of business of the corporation, which must be within this state, upon a day to be fixed by the articles of the corporation, and notice of such election must be given by registered or certified mail at least ten days prior to such date, or by publication in a newspaper published in the county in which the corporation has its principal place of business. At such meeting, the directors must be elected, and in case of a failure to elect on that day or on a day to which such annual meeting may be adjourned, the directors whose regular terms do not then expire shall proceed to elect such number of directors as have failed of election, and any vacancy in the office of director may be filled by the board until the next annual meeting. The board of directors, at its next meeting following the election of directors and after such directors have qualified, shall elect from its number a president, vice president, and such other officers as may be necessary to the transaction of the business of the corporation. The board shall define the powers, authority, and duties of such officers and employees by bylaws or resolutions, fix the conditions, form, and amount of their bonds, and approve the same, but no such officer or employee may enter upon the discharge of the person’s duties until such bond has been approved and has been filed with and approved by the commissioner.

Source: S.L. 1897, ch. 142, § 7; R.C. 1899, § 3258e; R.C. 1905, § 4681; C.L. 1913, § 5209; R.C. 1943, § 6-0507.

Collateral References.

Liability of bank or safe-deposit company for its employee’s theft or misappropriation of contents of safe-deposit box, 39 A.L.R.4th 543.

6-05-08. Corporate powers.

A corporation, when qualified as provided by section 6-05-04, may:

  1. Acquire, lease, purchase, own, hold, use, improve, mortgage, sell, and convey such real estate and personal property as may be necessary for the convenient transaction of its business. It may acquire real estate by foreclosure or upon compromise or settlement of prior mortgages held by it either as absolute owner or as trustee and may dispose of the same. No part of the capital, deposits, trust funds, or property owned or held by it, in trust or otherwise, may be invested in real estate except as herein authorized, unless the investment is made under and by virtue of a particular contract, or instrument, or order, judgment, or decree of court, which confers a special power or authority so to do, and then only with, or to the extent of, the moneys or funds thereby provided and belonging to such particular trust. Such corporation is authorized to purchase notes, bonds, mortgages, and other evidences of indebtedness, and other securities, subject to the limitations imposed upon banking associations as to investments, and to convert the same into cash and other securities.
  2. Act as trustee under will, agreement, court order, or otherwise, and act as fiscal agent and transfer agent.
  3. Take, accept, and hold on deposit for savings account or for safekeeping, or in escrow, or for investment, any and all moneys, bonds, stocks, and other securities, or personal property whatsoever. When any savings deposit has been received from a minor, the repayment of the deposit to the minor or the minor’s order is a complete discharge of such corporation from any further liability therefor. Whenever any officer or person, public or private, or any fiduciary, is authorized to pay into or deposit in any court any moneys, securities, or personal property whatsoever, the same instead of being deposited with or paid into court may be paid into or deposited with any corporation organized and acting under this chapter which may be designated for that purpose by the court having jurisdiction of the subject matter, or by the person owning or controlling such property. Whenever any fiduciary deposits any moneys, securities, or any personal property whatsoever, belonging to the fiduciary’s trust, with any corporation qualified and acting under this chapter and takes a receipt of such corporation therefor, the fiduciary and the fiduciary’s sureties thereafter are relieved from all liability therefor until the same again shall be delivered to the fiduciary by such corporation.
  4. Act as assignee, receiver, administrator, executor, guardian, or conservator.
  5. Provide by its bylaws and regulations for the payment of interest or dividends, for the investment of moneys, and conditions for repaying or withdrawing the same. It may borrow money upon the security of its own property or credit.
  6. Act as agent and attorney in fact in all respects as a natural person could do.
  7. Make, compile, and certify abstracts of title of real estate upon the conditions prescribed by the laws of this state relating to abstracters to ensure the validity and genuineness of titles to real property.
  8. Notwithstanding any other provision of law and subject to approval by the state banking board, engage in any fiduciary activity in which a federally chartered financial institution that is granted fiduciary powers may engage.

Source: S.L. 1897, ch. 142, § 8; R.C. 1899, § 3258f; S.L. 1903, ch. 195, § 1; R.C. 1905, § 4682; C.L. 1913, § 5210; R.C. 1943, § 6-0508; S.L. 1971, ch. 108, § 1; 1973, ch. 257, § 4; 1983, ch. 319, § 5; 1999, ch. 74, § 1; 2005, ch. 84, § 1.

Cross-References.

Foreign bank or trust company, right to serve in fiduciary capacity, see § 6-08-25.

Notes to Decisions

General Checking Accounts.

This section does not impliedly authorize trust companies to accept and pay out deposits on general checking accounts. If any implication is to be drawn from paragraph three, it is that the specifications stated therein exclusively limit the allowable types of deposits. Nelson v. Dakota Bankers Trust Co., 132 N.W.2d 903, 1964 N.D. LEXIS 154 (N.D. 1964).

Letters of Administration.

A foreign trust corporation was incompetent to receive letters of administration upon the local estate of a deceased person. Grunow v. Simonitsch, 21 N.D. 277, 130 N.W. 835, 1911 N.D. LEXIS 89 (N.D. 1911).

Life Annuities.

Trust companies are not authorized to grant and sell life annuities. State v. Equitable Life Assurance Soc'y, 68 N.D. 641, 282 N.W. 411, 1938 N.D. LEXIS 154, 1938 N.D. LEXIS 155 (N.D. 1938).

Registration of Securities.

Securities issued by a trust company organized under this chapter are exempt from registration under Securities Act of 1951 (chapter 10-04); it is not unlawful under N.D.C.C. § 10-04-04 to sell securities issued by a trust company which are exempt from registration under N.D.C.C. § 10-04-05(2); however, exemption of securities from registration does not exempt trust company from being registered as a “dealer” under N.D.C.C. § 10-04-10 if it is to offer for sale or sell its exempt securities. State ex rel. Holloway v. First Am. Bank & Trust Co., 186 N.W.2d 573, 1971 N.D. LEXIS 163 (N.D. 1971).

6-05-08.1. Issuance of certificates of deposit — Penalty. [Repealed]

Repealed by S.L. 1991, ch. 82, § 7.

6-05-09. Savings, investment, and trust property — Separate accounts.

Whenever any sum or sums of money, or any real or personal property, has been received by, deposited with, or conveyed to be held by such a corporation for savings or investment account, or in trust under any of the provisions of subsection 1, 2, 3, or 4 of section 6-05-08, such money or property, and all evidences of the investment of the same, and their accretions, must be kept by such corporation separate and apart and readily identified from similar property of its own or of other persons, and the same is not liable for any debt or claim against the corporation, except for debts or claims accruing to and in favor of the person or persons making such deposits or creating such trusts, or the beneficiaries thereunder.

Source: S.L. 1903, ch. 195, § 1, subs. 9; R.C. 1905, § 4682, subs. 9; C.L. 1913, § 5210, subs. 9; R.C. 1943, § 6-0509.

6-05-10. Discretionary power of investment — Limitations.

The directors of any such corporation have discretionary power to invest all moneys received by it on deposit or in trust, and the investment or deposit of which otherwise may not be limited or directed, in such securities as are herein authorized. The corporation is responsible to the owners or beneficiaries of such moneys, for the validity, regularity, quality, value, and genuineness of all such investments and securities at the time said investments are so made, and for the safekeeping of the evidences and securities thereof. If any special direction, limitation, agreement, or trust is imposed, made or conferred in and by the order, judgment, decree, will, contract, deed, conveyance, or other written instrument, as to the particular manner, or the particular class or kinds of securities, funds, or property, whether real or personal, in which the moneys must be invested, the corporation shall follow and carry out such order, judgment, decree, contract, deed, or other written instrument or instruction, and may not be held liable or responsible for any loss, damage, or injury which may occur to or be incurred by any person or beneficiary by reason of its proper performance of such trust, and the directions or limitations thereof.

Source: S.L. 1897, ch. 142, § 8, subs. 8; R.C. 1899, § 3258g; R.C. 1905, § 4683; C.L. 1913, § 5211; R.C. 1943, § 6-0510.

6-05-11. Bond not required — Power to be surety on judicial bonds — Deposit of securities.

No bond or other security, oath, or other qualification is necessary to enable such corporation to accept any appointment or trust. It is lawful for any such corporation to become surety upon any bond or undertaking for or on behalf of any person, persons, or corporation, in any suit, action, or special proceeding, in any court in this state. Whenever a bond or new sureties on a bond may be required from any person, persons, or corporation, acting in any trust capacity whatever, if the value of the estate or fund is so great that the judge of the court having jurisdiction of the proceedings deems it inexpedient to require security in the full amount prescribed by law, the judge may direct that any securities for the payment of moneys belonging to the estate or fund be deposited, subject to the order of the person acting in such trust capacity, countersigned by a judge of said court, with any trust company organized and qualified to do business under the provisions of this chapter. After such deposit has been made, the judge may fix the amount of the bond with respect to the value of the remainder only of such estate or fund.

Source: S.L. 1897, ch. 142, § 8, subs. 9; R.C. 1899, § 3258h; R.C. 1905, § 4684; C.L. 1913, § 5212; R.C. 1943, § 6-0511.

6-05-11.1. Bonds of officers and employees.

An officer or employee of any trust company, before entering upon the person’s duties, shall furnish a bond to the trust company in the sum and upon the conditions as required by the board of directors in keeping with rules adopted by the state banking board. All bonds must be approved by the board of directors of the trust company and are subject to the approval of the commissioner. A record of the approval of the bonds by the board of directors of the trust company must be made on the records of the trust company and the bonds must be filed with the commissioner. Stockholders of the trust company are not eligible as bondsmen for the officers or employees.

Source: S.L. 1999, ch. 75, § 1.

6-05-12. Court bonds not required.

Any such corporation is not required to give any bond or security in connection with the execution of any trust, or in any suit, action, or special proceeding, during the performance of any such trust, in any court in this state.

Source: S.L. 1897, ch. 142, § 8, subs. 10; R.C. 1899, § 3258i; R.C. 1905, § 4685; C.L. 1913, § 5213; R.C. 1943, § 6-0512.

6-05-13. Transfer of trust to corporation.

Any executor, administrator, guardian, conservator, trustee, assignee, or receiver may resign that person’s trust in favor of a corporation organized, acting, and qualified under this chapter, and thereupon, such corporation may be appointed as trustee by any court having jurisdiction of the subject matter of such trust upon such terms and conditions as such court may prescribe.

Source: S.L. 1897, ch. 142, § 8, subs. 11; R.C. 1899, § 3258j; R.C. 1905, § 4686; C.L. 1913, § 5214; R.C. 1943, § 6-0513; S.L. 1973, ch. 257, § 5.

6-05-14. Compensation — Lien.

For the faithful performance of any trust, duty, obligation, or service imposed or conferred upon or accepted by any corporation under the provisions of this chapter, it is entitled to receive a reasonable compensation, or such compensation as may have been fixed by the contract or agreement of the parties, as well as any and all advances necessarily paid out and expended in the discharge and performance thereof, and to charge legal interest, as permitted by law, upon such advances unless otherwise agreed upon. The company has a lien upon all moneys, securities, and all property of every description which may come into its possession while in the performance of such trust, for the payment of all sums due or to become due to it for services, expenses, and advances, and the costs and expenses of enforcing such payment.

Source: S.L. 1897, ch. 142, § 8, subs. 12; R.C. 1899, § 3258k; R.C. 1905, § 4687; C.L. 1913, § 5215; R.C. 1943, § 6-0514; S.L. 1971, ch. 108, § 2.

6-05-15. Investment of trust funds.

Any sum of money, which is collected or received by any such corporation in its trust capacity, and which is not required for the purposes of the trust, or which is not to be accounted for within one year from the date of collection, receipt, or deposit, must be invested by the corporation as soon as practicable.

In acquiring, investing, reinvesting, exchanging, retaining, selling, and managing the property for the benefit of another, the trustee shall exercise the judgment and care under the circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital. Within the limitations of the foregoing standard, the trustee is authorized to acquire and retain every kind of property, real, personal, or mixed, and every kind of investment, specifically including but not by way of limitation, bonds, debentures, and other corporate obligations and stocks, preferred or common, including investment trusts, mutual funds, money market funds, and other similar funds in which the trustee or any of its affiliates may have a beneficial interest, which persons of prudence, discretion, and intelligence acquire or retain for their own account, and within the limitations of the foregoing standard, the trustee may retain property properly acquired without limitation as to time and without regard to its suitability for original purchase. The net interest and profits of such investments, less the reasonable charges and disbursements of the corporation in connection therewith, must be accounted for and paid over as a part of the trust. The net accumulations of interest and profits likewise must be invested and reinvested as a part of the principal, and such investments must be received and allowed in the settlement of the trust.

Source: S.L. 1897, ch. 142, § 9; R.C. 1899, § 3258l; R.C. 1905, § 4688; C.L. 1913, § 5216; R.C. 1943, § 6-0515; S.L. 1951, ch. 103, § 1; 1957 Supp., § 6-0515; S.L. 1963, ch. 99, § 1; 1979, ch. 129, § 1; 1983, ch. 112, § 1.

Collateral References.

Trust company’s acts as fiduciary as practice of law, 69 A.L.R.2d 404.

6-05-15.1. Corporate trustee — Investment of trust funds — Commingling funds.

Any trust company may invest all moneys received by it in authorized securities, and shall be responsible to the owner or beneficiary of a trust for the validity, regularity, quality, value, and genuineness of these investments and securities so made, and for the safekeeping of the securities and evidences thereof. When special directions are given in any order, judgment, decree, will, or other written instrument as to the particular manner or the particular class or kind of securities or property in which any investment must be made, it shall follow such directions, and in such case it is not further responsible by reason of the performance of such trust. In all other cases it may invest funds held in any trust capacity in authorized securities using its best judgment in the selection thereof, and shall be responsible for the validity, regularity, quality, and value thereof at the time made, and for their safekeeping. Whether it be the sole trustee or one of two or more cotrustees, it may invest in fractional parts of, as well as in whole, securities, or may commingle funds for investment. If it invests in fractional parts of securities or commingles funds for investment, all of the fractional parts of such securities, or the whole of the funds so commingled must be owned and held by the trust company in its several trust capacities, and it is liable for the administration thereof in all respects as though separately invested. Funds so commingled for investment must be designated collectively as a common trust fund. It may, in its discretion, retain and continue any investment and security or securities coming into its possession in any fiduciary capacity. The foregoing applies as well whether a corporation trustee is acting alone or with an individual cotrustee.

Source: S.L. 1955, ch. 101, § 1; R.C. 1943, 1957 Supp., § 6-05151; S.L. 1963, ch. 100, § 1; 1967, ch. 88, § 1; 1983, ch. 113, § 1; 2013, ch. 77, § 20.

6-05-15.2. Common trust funds of affiliates.

Notwithstanding the provisions of section 6-05-15, any bank or trust company qualified to act as fiduciary in this state may:

  1. Establish and maintain common trust funds for the collective investment of funds held in any fiduciary capacity by it or by another bank or trust company which is owned or controlled by a corporation which owns or controls such bank or trust company.
  2. As a fiduciary or cofiduciary, invest funds which it holds for investment in common trust funds established and maintained pursuant to subsection 1 if such investment is not prohibited by the instrument, judgment, decree, or order creating such fiduciary relationship. This section applies to fiduciary relationships now in existence or hereafter created.

To the extent not inconsistent with the provisions of this section, the provisions of section 6-05-15.1 relating to common trust funds apply to the establishment and maintenance of common trust funds under this section.

Source: S.L. 1979, ch. 130, § 1.

6-05-15.3. Deposit of trust funds awaiting investment or distribution in affiliates.

A bank or trust company qualified to and acting as fiduciary or cofiduciary in this state may deposit trust funds awaiting investment or distribution in a bank, including, without limitation, a bank that owns or controls, or that is owned or controlled by a corporation that owns or controls, the bank or trust company.

Source: S.L. 1995, ch. 88, § 1.

6-05-15.4. Multiple offices or places of business — Application to state banking board — Hearing.

  1. A trust company may establish and maintain for itself and its operating subsidiary organizations one or more offices or places of business within this state, throughout the United States, in foreign countries, or in dependencies or insular possessions of the United States upon written application to the department of financial institutions. Additional branches in the United States may be approved by the commissioner, while all other branches must be approved by the state banking board. The application must include the information specified by the board.
  2. Notice of the application to establish and maintain an office or place of business must be published as required by the state banking board.
  3. The commissioner shall determine if the application is complete and shall notify the trust company of the determination. If the commissioner determines the application is incomplete, the commissioner shall request the additional information necessary to complete the application. The commissioner or state banking board either shall approve the application or shall notify the trust company that a hearing on the application will be required.
  4. Any hearing required by the commissioner or state banking board must be commenced and concluded by issuance of an order of the board.
  5. The commissioner or state banking board may disapprove the application if the commissioner or board find:
    1. The establishment and maintenance of the office or place of business will jeopardize the solvency of the trust company; or
    2. The operation of more than one office or place of business by the trust company will place the company in an unsafe and unsound condition.
  6. If a North Dakota chartered trust company desires to move a branch previously established to another location, the trust company shall apply to the commissioner for such authority and provide the commissioner with such relevant information as the commissioner may reasonably request.

Source: S.L. 1995, ch. 80, § 2; 2001, ch. 88, § 17; 2021, ch. 76, § 11, effective April 13, 2021.

6-05-15.5. Structure of trust company — Operating subsidiaries — Notice — Hearing — Supervision.

  1. A trust company may conduct its business directly or through one or more operating subsidiary organizations, including a limited purpose bank that is established under the laws of a jurisdiction other than this state. The activities of an operating subsidiary of a trust company must be limited to those activities in which the trust company itself could engage.
  2. A trust company that desires to establish or acquire an operating subsidiary must submit a written notification to the department of financial institutions not less than thirty days before the trust company’s investment in the subsidiary organization is made. The notification must include the information specified by the state banking board.
  3. Within ten business days after receipt of the notification by the department, the commissioner shall determine if the notice is complete and shall notify the trust company of the determination. If within the ten business days the commissioner determines that the notice is incomplete, the commissioner shall request the additional information necessary to complete the notice. Within ten days after receipt of the additional information, the commissioner shall notify the trust company by mail of the commissioner’s determination of completeness. The commissioner shall inform the state banking board of the receipt of a completed notice. Upon expiration of thirty days from the date for the mailing of a notice of completeness, the trust company’s investment in the operating subsidiary in accordance with its notice is deemed approved by the state banking board, unless within that thirty-day period the state banking board has served the trust company with a notice of hearing on the company’s proposed investment.
  4. Any hearing required by the state banking board must be commenced and concluded by the issuance of the order of the board within ninety days after the date for the mailing of a notice of completeness by the commissioner. If the hearing is not concluded within the ninety-day period, the investment by the trust company is deemed approved by the state banking board.
  5. The state banking board may prohibit the trust company’s investment in an operating subsidiary organization if it finds after a hearing:
    1. The investment will jeopardize the solvency of the trust company; or
    2. The operation of the trust company through the subsidiary organization will place the trust company in an unsafe and unsound condition.
  6. The state banking board has the same authority to examine and supervise an operating subsidiary as exists for the trust company.

Source: S.L. 1995, ch. 80, § 3; 2001, ch. 88, § 18.

6-05-16. Indebtedness of directors — Prohibition and exception — Theft — Penalty.

Such corporation may not loan its funds, moneys, capital, trust funds, or any other property whatsoever to any director, officer, agent, or other employee thereof, nor may any such director, officer, agent, or other employee become in any manner indebted to said corporation by means of any overdraft, promissory note, account, endorsement, guaranty, or other contract whatsoever unless such indebtedness has been approved or authorized first by the board of directors, or an investment committee created by it, and such approval entered in the minutes of the proceedings of such board or committee. Any such director, agent, or employee who becomes indebted to said company, contrary to the provisions hereof, is guilty of the crime of theft to the amount of such indebtedness from the time such indebtedness was created and must be punished in the manner prescribed by section 12.1-23-05. The execution and delivery of the official bond of such officer, agent, or employee, or that person’s endorsement of commercial paper, however, may not be considered as an indebtedness for the purpose of this section.

Source: S.L. 1897, ch. 142, § 10; R.C. 1899, § 3258m; S.L. 1903, ch. 195, § 2; R.C. 1905, § 4689; C.L. 1913, § 5217; R.C. 1943, § 6-0516; S.L. 1975, ch. 106, § 47.

6-05-17. Corporation subject to court orders — Reports to court.

Every such corporation is subject at all times to the orders, judgments, and decrees of any court of record from which or under which it has accepted any trust, appointment, or commission as to such trust, and shall render to the court such itemized and verified accounts, statements, and reports as may be required by law, or as such court shall order in relation to any trust.

Source: S.L. 1897, ch. 142, § 11; R.C. 1899, § 3258n; R.C. 1905, § 4690; C.L. 1913, § 5218; R.C. 1943, § 6-0517.

6-05-18. Annual report to state examiner — Publication. [Repealed]

Repealed by S.L. 1969, ch. 117, § 1.

6-05-19. Fidelity insurance and corporate suretyship — Domestic and foreign corporations. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-20. Execution and acceptance of bond from surety company — Bond as compliance with law. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-21. Cost of bond allowable as expense and taxable as costs in suit. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-22. Domestic surety companies and agents must obtain certificate from insurance commissioner. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-23. Concurrent undertakings permitted — Losses prorated. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-24. Surety company may petition to be relieved from liability — Procedure. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-25. When subscribed capital stock must be paid in. [Repealed]

Source: S.L. 1897, ch. 142, § 4; R.C. 1899, § 3115e; S.L. 1903, ch. 113, § 7; R.C.1905, § 4461; C.L. 1913, § 4910; R.C. 1943, § 6-0525; repealed by 2015, ch. 80, § 8, effective July 1, 2015.

6-05-26. Increase in capital stock — Action by stockholders — Report to state banking board.

The capital stock of such a corporation may be increased from time to time by a majority vote of its stockholders. Such action may be taken at any regularly called general or special meeting held upon sixty days’ notice, when in the notice of such meeting the object thereof has been set out fully. No such increase of capital stock is valid unless paid in, in cash, and reported to the state banking board in writing, verified by the oath of the president, secretary, or managing officer of the corporation.

Source: S.L. 1897, ch. 142, § 13; R.C. 1899, § 3258o; R.C. 1905, § 4691; C.L. 1913, § 5219; S.L. 1931, ch. 63, § 4; R.C. 1943, § 6-0526; 2013, ch. 77, § 21.

Cross-References.

Securities of national bank and trust company exempt from regulation of chapter 10-04, see § 10-04-05, subs. 2.

6-05-27. Commissioner to order increase in security deposit — When.

Whenever it appears to the commissioner, from an examination of the business of any such corporation, that the deposit made by it, as hereinbefore required, is insufficient to insure the safety of its deposit, trust, and contingent liabilities, the commissioner shall make an order, as hereinafter provided, requiring an increase of such deposit. Such company immediately upon receipt of such order shall deposit with the commissioner, or a designated agent, other and further securities of the kind, class, and value designated in section 6-05-04 in an amount sufficient to comply with said order.

Source: S.L. 1897, ch. 142, § 13; R.C. 1899, § 3258o; R.C. 1905, § 4691; C.L. 1913, § 5219; S.L. 1931, ch. 93, § 4; R.C. 1943, § 6-0527; S.L. 1989, ch. 113, § 4.

Cross-References.

Property of insolvent bank exempt from attachment and execution; appointment of receiver postponed, see § 6-07-04.

Notes to Decisions

General Powers of Commissioner.

Commissioner’s powers with respect to insolvent corporations organized under this chapter are not limited to those specified in this section and N.D.C.C. § 6-05-29, and his power under N.D.C.C. § 6-07-04 to take possession of a corporation’s property and appoint a temporary receiver is not inconsistent with this section. First Am. Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 1972 N.D. LEXIS 149, 1972 N.D. LEXIS 177 (N.D. 1972).

6-05-28. Examination by commissioner — Fees — Power over business, officers, and employees.

The commissioner shall make a full, true, complete, and accurate examination and investigation of the affairs of each corporation doing business under this chapter as often as the commissioner deems necessary. Such examination may be made without previous notice to the corporation to be examined. Fees for such examinations must be charged by the department of financial institutions at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the examinations provided for by this section. Fees must be paid to the department of financial institutions and deposited in the financial institutions regulatory fund. The commissioner, in the commissioner’s discretion, may accept, in lieu of any examination authorized or required by this title to be conducted by the department of financial institutions, the examination that may have been made of such institution within a reasonable period by the federal reserve bank or federal deposit insurance corporation, if a copy of such examination is furnished to the commissioner. The commissioner shall assume and exercise over each such corporation and its business, officers, directors, and employees all the power and authority conferred upon the commissioner over financial or moneyed corporations or associations.

Source: S.L. 1897, ch. 142, § 12; R.C. 1899, § 3258p; S.L. 1903, ch. 195, § 3; R.C. 1905, § 4692; C.L. 1913, § 5220; S.L. 1931, ch. 93, § 5; R.C. 1943, § 6-0528; S.L. 1979, ch. 131, § 1; 1983, ch. 110, § 3; 1987, ch. 111, § 1; 1989, ch. 96, § 2; 2001, ch. 88, § 19; 2013, ch. 77, § 22; 2019, ch. 123, § 3, effective July 1, 2019.

Notes to Decisions

Applicability.

This section expressly renders N.D.C.C. § 6-07-04, entitled “Property of insolvent bank exempt from attachment and execution — Appointment of receiver postponed”, applicable to corporations organized under N.D.C.C. ch. 6-05. First Am. Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 1972 N.D. LEXIS 149, 1972 N.D. LEXIS 177 (N.D. 1972).

6-05-29. Duty of commissioner when examination discloses violation of law.

If it appears to the commissioner from any examination made by the commissioner that any such corporation has committed a violation of the law or that it is conducting its business in an unsafe or unauthorized manner, or that the deposit made by it with the department of financial institutions, as hereinbefore provided, is insufficient to protect the interests of all concerned, the commissioner, by an order addressed to such corporation, shall direct the discontinuance of such illegal or unsafe practice, and order it to conform with the requirements of the law or to make a further deposit with the department of financial institutions in an amount sufficient to insure the safety of its trusts, deposits, and liabilities. Whenever any corporation refuses to comply with any such order, or whenever it appears to the commissioner that it is unsafe or inexpedient for any such corporation to continue to transact business, the commissioner shall communicate the facts to the attorney general, who thereupon shall institute such proceedings against any such corporation as the case may require.

Source: S.L. 1897, ch. 142, § 14; R.C. 1899, § 3258p; S.L. 1903, ch. 195, § 3; R.C. 1905, § 4692; C.L. 1913, § 5220; S.L. 1931, ch. 93, § 5; R.C. 1943, § 6-0529; 2013, ch. 77, § 23.

Notes to Decisions

Power of Commissioner.

Commissioner’s powers with respect to insolvent corporations organized under this chapter are not limited to those specified in this section and N.D.C.C. § 6-05-27, and his power under N.D.C.C. § 6-07-04 to take possession of a corporation’s property and appoint a temporary receiver is not inconsistent with this section. First Am. Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 1972 N.D. LEXIS 149, 1972 N.D. LEXIS 177 (N.D. 1972).

6-05-30. Conditions under which foreign corporation may do fidelity and surety business. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-31. Service on foreign corporation doing fidelity and surety business. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-32. Foreign corporation doing fidelity or surety business to pay tax — To whom paid — How determined. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-33. Responsibility of fidelity and surety corporation for fraud of bonded officer. [Repealed]

Repealed by S.L. 1983, ch. 332, § 26.

6-05-34. Other code provisions applicable to corporations doing business under this chapter.

The provisions of title 10, as it may be amended from time to time, governing profit corporations, and sections 6-01-06, 6-01-09, 6-03-11, 6-03-12, 6-03-27, 6-03-33, 6-03-34, 6-03-35, 6-03-41, 6-03-42, 6-03-51, 6-03-52, 6-03-53, 6-03-54, 6-03-55, 6-03-56, 6-03-57, 6-03-58, 6-03-61, 6-03-62, 6-03-63, 6-03-64, 6-03-65, 6-03-70, 6-03-72, chapter 6-07.2, sections 6-08-03, 6-08-06, 6-08-09, 6-08-14, and 6-08-20 are applicable to and must be observed by all corporations organized under this chapter, except as to provisions thereof inconsistent with the provisions of this chapter.

Source: S.L. 1897, ch. 142, § 2; R.C. 1899, § 3258a; R.C. 1905, § 4677; C.L. 1913, § 5205; S.L. 1931, ch. 93, § 1, subs. b; R.C. 1943, § 6-0534; S.L. 1971, ch. 108, § 3; 1977, ch. 71, § 2; 1991, ch. 87, § 2; 2021, ch. 77, § 7, effective August 1, 2021.

Cross-References.

Appointment of receivers, see § 6-01-06.

Profit corporations, see ch. 10-19.1.

Notes to Decisions

Rate of Interest on Deposits.

N.D.C.C. § 6-03-63 governing rate of interest that may be paid on deposits by banking associations is applicable to trust company organized under N.D.C.C. ch. 6-05. State v. Hart, 162 N.W.2d 499, 1968 N.D. LEXIS 75 (N.D. 1968).

CHAPTER 6-05.1 Subsidiary Trust Companies

6-05.1-01. Definitions.

As used in this chapter, unless the context plainly requires otherwise:

  1. “Affiliated bank”, with respect to a subsidiary trust company, means any of the following:
    1. A bank incorporated under the laws of this state, or a national banking association having its main office in this state, more than fifty percent of the voting stock of which is owned by the same owning bank holding company that owns more than fifty percent of the voting stock of such subsidiary trust company.
    2. A bank which owns shares of voting stock of such subsidiary trust company.
  2. “Fiduciary capacity” means a capacity resulting from a bank undertaking to act alone or jointly with others primarily for the benefit of another in all matters connected with its undertaking and includes the capacities of trustee, including trustee of a common trust fund, executor, administrator, personal representative, registrar, or transfer agent with respect to stocks, bonds, or other evidences of indebtedness of any corporation, association, municipality, state or public authority, guardian of estates, conservator, receiver, escrow agent, agent for the investment of money, attorney in fact, and any other similar capacity.
  3. “Main office”, with respect to a subsidiary trust company or an affiliated bank, is the place designated in the articles of incorporation or articles of association of such subsidiary trust company or affiliated bank at which its principal functions are to be conducted.
  4. “Owning bank holding company”, with respect to a subsidiary trust company or an affiliated bank, means a bank holding company as defined in the United States Bank Holding Company Act of 1956, as amended.
  5. “Subsidiary trust company” means any trust company incorporated under the laws of this state, or any national banking association formed under the laws of the United States solely for the purpose of engaging in trust business with its main office in this state, more than fifty percent of the voting stock of which is owned by an owning bank holding company or by a bank having its main office in this state or by two or more banks each of which has its main office in this state, and which has as its sole purpose the conduct of trust business as defined in section 6-05-08. A subsidiary trust company may not conduct commercial banking business but may maintain deposits of funds of fiduciary accounts not currently invested.
  6. “Trust office”, with respect to a subsidiary trust company, means an office, including the main office, of such subsidiary trust company maintained for the purpose of conducting its business.

Source: S.L. 1977, ch. 72, § 1.

6-05.1-02. Organization of subsidiary trust companies.

A subsidiary trust company may be incorporated under the laws of this state or formed under the laws of the United States. To the extent not inconsistent with the provisions of sections 6-05.1-01 through 6-05.1-05, any subsidiary trust company incorporated under the laws of this state is subject to the laws of this state generally applicable to trust companies. A subsidiary trust company formed under the laws of the United States is, to the extent provided by the laws of the United States, subject to the laws of this state applicable to subsidiary trust companies incorporated under the laws of this state.

Source: S.L. 1977, ch. 72, § 2.

6-05.1-03. Permissible business of subsidiary trust companies.

The permissible business of a subsidiary trust company is to engage in such trust business as may be engaged in by a trust company pursuant to section 6-05-08. A subsidiary trust company may not exercise any of the powers provided in subsection 7 of section 6-03-02, nor conduct commercial banking business, but may maintain deposits of funds of fiduciary accounts not currently invested.

Source: S.L. 1977, ch. 72, § 3; 1995, ch. 82, § 2.

6-05.1-04. Trust offices of subsidiary trust companies.

A subsidiary trust company may establish and maintain for itself and its subsidiary entities one or more offices or places of business within this state, throughout the United States, in foreign countries, or in dependencies or insular possessions of the United States. The regulatory process by which a subsidiary trust company obtains authority to establish and maintain offices in addition to a main office must be the same as the process that applies to a trust company under chapter 6-05.

Source: S.L. 1977, ch. 72, § 4; 1983, ch. 114, § 1; 2005, ch. 85, § 1.

6-05.1-05. Transfer of fiduciary relationships from affiliated banks to subsidiary trust companies.

  1. Any subsidiary trust company which has been duly authorized to commence the business for which it is organized, and which has made any deposit of securities required by law, may at any time file its verified application in the district court of the county in which its main office is located requesting that it be substituted, except as may be expressly excluded in the application, in every fiduciary capacity for each of its affiliated banks specified in the application, and each such specified affiliated bank shall join in the application. Any such application must indicate the county wherein the main office of each affiliated bank joining in the application is located and must designate each fiduciary account existing at the date thereof with respect to which the applicant requests substitution, but fiduciary capacities in other cases need not be listed. Any such application must additionally set forth, with regard to each existing fiduciary account with respect to which the applicant requests substitution, the name and address last known to the applicant of each person entitled to mailed notice of hearing thereon, who are as follows:
    1. In the case of an existing fiduciary account which may be revoked, terminated, or amended, each person who, alone or together with others, is empowered to revoke, terminate, or amend the same.
    2. In the case of an existing fiduciary account with respect to which any person other than a court has the power to remove the corporate fiduciary, each person who, alone or together with others, is empowered to remove the corporate fiduciary.
    3. In the case of an existing fiduciary account which is an estate of a deceased person or which is a guardianship, or conservatorship, the clerk of the court in which such estate, guardianship or conservatorship matter is pending.
    4. In the case of an existing fiduciary account not described in any of the foregoing subdivisions, each income beneficiary of such account and each beneficiary who, were such account terminated at the date of the application respecting such account, would be entitled to share in distributions of income or principal thereof.
    5. In the case of an existing fiduciary account wherein an affiliated bank specified in the application is acting with a cofiduciary, to each such cofiduciary.
  2. When any such application has been filed with the district court, the court shall make an order fixing a date and time for hearing thereon and directing that notice thereof be given as hereinafter provided. The applicant shall cause a copy of such notice to be published at least once a week for three successive weeks preceding the hearing date, the last such publication to be at least ten days preceding the hearing date. Such publication must be made in a newspaper of general circulation published in each county in which the main office of an affiliated bank specified in the application is located. In addition, at least fourteen days preceding the hearing date, the applicant shall cause a copy of such notice to be mailed by first-class mail to each person identified in the application as being entitled to mailed notice under the provisions of this section, at that person’s address last known to the applicant as set forth in the application. Proof of the giving of such notice must be made on or before the hearing date and filed in the proceeding.
  3. The notice to be published and mailed with respect to each such application shall state the time and place of the hearing thereon, the name of the subsidiary trust company which has filed the application, the name of each affiliated bank which has joined in the application, that the application requests that the subsidiary trust company be substituted in every fiduciary capacity for each of its affiliated banks specified in the application, and that any person entitled to receive mailed notice pursuant to this section with respect to any existing fiduciary account may appear on or before the date of hearing and file written objection to such substitution as to such account, and such notice must refer to such application for further particulars.
  4. On or before the date and time of hearing any such application, any person entitled to receive mailed notice pursuant to this section with respect to any existing fiduciary account may appear and file objection to substitution of the applicant in such account and is then entitled to be heard with respect to such objection. The court may not apply the provisions of this section to substitute a subsidiary trust company as fiduciary of any existing fiduciary account with respect to which a person entitled to receive mailed notice pursuant to this section has filed objection to substitution and has appeared and been heard in support thereof.
  5. On such date of hearing, upon finding that due notice has been given as required by this section and upon finding that the applicant subsidiary trust company has been duly authorized to commence the business for which it is organized by the state banking board, or by the comptroller of the currency if the applicant is a national banking association, and that the applicant has made such deposit of securities as may be required by law, the district court shall enter an order substituting the applicant in every fiduciary capacity for each of its specified affiliated banks, excepting as may be otherwise specified in the application, and excepting fiduciary capacities in any account with respect to which a person entitled to receive mailed notice pursuant to this section has filed objection to substitution and has appeared and been heard in support thereof. Upon entry of such order, or at such later date as may be specified in such order, the applicant subsidiary trust company must, without further act, be substituted in every such fiduciary capacity. The substitution may be made a matter of record in any county of this state by filing a certified copy of the order of substitution in the office of the clerk of any district court in this state or by filing a certified copy of such order in the office of the recorder of any county of this state to be recorded and indexed in like manner and with like effect as other orders and decrees of court are recorded and indexed.
  6. Each designation, in a will or other instrument heretofore or hereafter executed, of a bank as fiduciary is deemed a designation of the subsidiary trust company substituted for such bank pursuant to this section except when such will or other instrument is executed after such substitution and expressly negates the application of this section. Any grant in any such will or other instrument of any discretionary power is deemed conferred upon the subsidiary trust company deemed designated as the fiduciary pursuant to this section.
  7. A bank shall account jointly with the subsidiary trust company which has been substituted as fiduciary for such bank pursuant to this section for the accounting period during which the subsidiary trust company is initially so substituted. Upon substitution pursuant to this section, the bank shall deliver to the subsidiary trust company all assets held by the bank as fiduciary, except assets held for fiduciary accounts with respect to which there has been no substitution pursuant to this section, and upon such substitution all such assets become the property of the subsidiary trust company without the necessity of any instrument of transfer or conveyance.

Source: S.L. 1977, ch. 72, § 5; 1991, ch. 326, § 3; 2001, ch. 120, § 1.

CHAPTER 6-05.2 Fiduciary Powers

6-05.2-01. Policies and procedures on brokerage placement practices.

Each banking institution exercising investment discretion with respect to an account must adopt and follow written policies and procedures intended to ensure that its brokerage placement practices comply with all applicable laws and regulations. Among other relevant matters, the written policies and procedures should address when appropriate:

  1. The selection of persons to effect securities transactions and the evaluation of the reasonableness of any brokerage commissions paid to such persons.
  2. The acquisition of any services or products, including research services, in return for brokerage commissions.
  3. The allocation of research or other services among accounts, including those which did not generate commissions to pay for the research or other services.
  4. The need, in appropriate instances, to make disclosures concerning the policies and procedures to prospective and existing customers.

Source: S.L. 1993, ch. 67, § 4.

6-05.2-02. Administration of fiduciary powers.

  1. The board of directors is responsible for the proper exercise of fiduciary powers by the banking institution. All pertinent matters, including the determination of policies, the investment and disposition of property held in a fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees used by the banking institution in the exercise of its fiduciary powers, are the responsibility of the board. In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of any of the banking institution’s fiduciary powers as it may consider proper to assign to its directors, officers, employees, or committees as it may designate.
  2. No fiduciary account may be accepted without the prior approval of the board of directors, or of the directors, officers, or committees to whom the board may have designated the performance of that responsibility. A written record must be made of all acceptances and of the relinquishment or closing out of all fiduciary accounts. Upon the acceptance of an account for which the banking institution has investment responsibilities, a prompt review of the assets must be made. The board must ensure that at least once during every calendar year, and within fifteen months of the last review, all the assets held in or for each fiduciary account where the banking institution has investment responsibilities are reviewed to determine the advisability of retaining or disposing of the trust assets.
  3. All officers and employees taking part in the operating of trust activities must be adequately bonded.
  4. Every banking institution exercising fiduciary powers must designate, employ, or retain legal counsel who is readily available to pass upon fiduciary matters and to advise the banking institution as to its trust activities.
  5. Every banking institution exercising fiduciary powers must adopt written policies and procedures to ensure that the federal securities laws are complied with in connection with any decision or recommendation to purchase or sell any security. The policies and procedures, in particular, must ensure the banking institution may not use inside information in connection with any decision or recommendation to purchase or sell any security.

Source: S.L. 1993, ch. 67, § 4.

6-05.2-03. Books and accounts.

  1. Every banking institution exercising fiduciary powers must keep its fiduciary records separate and distinct from other records of the banking institution. All fiduciary records necessary for reporting purposes must be maintained for such time as to enable the banking institution to furnish such information or reports with the commissioner. The fiduciary records must contain full information relative to each account.
  2. Every banking institution must keep an adequate record of all pending litigation to which it is a party in concerning its exercise of fiduciary powers.
  3. A banking institution must retain the records required for a period of three years from the later of the termination of the fiduciary account relationship to which the records relate or of litigation relating to the account.

Source: S.L. 1993, ch. 67, § 4.

6-05.2-04. Audit of trust activities.

A committee of directors, exclusive of any active officers of the bank, must, at least once during each calendar year and within fifteen months of the last audit, make suitable audits of the trust activities or cause suitable audits to be made by auditors responsible to the board of directors, and must ascertain whether the trust activities have been administered in accordance with law and sound fiduciary principles. The board of directors may, instead of the periodic audit, adopt an adequate continuous audit system. A report of the audits and examination required under this section, together with any action taken, must be noted in the minutes of the board of directors.

Source: S.L. 1993, ch. 67, § 4.

6-05.2-05. Uninvested or undistributed funds.

Uninvested or undistributed funds held by a banking institution in a fiduciary capacity must not be held uninvested or undistributed any longer than is reasonable for the proper management of the account. Each banking institution exercising fiduciary powers must adopt and follow written policies and procedures intended to ensure that the maximum rate of return available for trust-quality, short-term investments is obtained consistent with the requirements of the governing instrument or law. The policies and procedures must take into consideration all relevant factors, including the anticipated return that could be obtained while the cash remains uninvested or undistributed, the cost of investing the funds, and the anticipated need for the funds.

Source: S.L. 1993, ch. 67, § 4.

6-05.2-06. Self-dealing.

  1. Funds held by a banking institution as fiduciary may not be invested in stock or obligations of, or property acquired from, the banking institution or its directors, officers, or employees, or individuals with whom there exists such a connection, or organizations in which there exists such an interest, as affects the exercise of the best judgment of the banking institution in acquiring the property, or in stock or obligations of, or property acquired from, affiliates of the banking institution or their directors, officers, or employees, unless authorized by the instrument creating the relationship or as authorized by law.
  2. Property held by a banking institution as fiduciary may not be sold or transferred, by loan or otherwise, to the banking institution or its directors, officers, or employees, or to individuals with whom there exists such a connection, or organizations in which there exists such an interest, as affects the exercise of the best judgment of the banking institution in selling or transferring the property, or to affiliates of the banking institution or their directors, officers, or employees except:
    1. As authorized by the instrument creating the relationship or as authorized by law;
    2. When the banking institution has been advised in writing by its counsel or auditor that it has incurred as a fiduciary a contingent or potential liability and desires to relieve itself of that liability, a sale or transfer may be made with the approval of the board of directors, provided that the banking institution, upon consummation of the sale or transfer, makes reimbursement in cash at no loss to the account;
    3. To purchase at market value, defaulted investment funds; or
    4. Where ordered by the board.
  3. Funds held by a banking institution as fiduciary may not be invested by the purchase of stock or obligations of the banking institution or its affiliates unless authorized by the instrument or as authorized by law. If the retention of stock or obligations of the banking institution or its affiliates is authorized by the instrument creating the relationship, by court order, or by law it may exercise rights to purchase its own stock or securities convertible into its own stock when offered pro rata to stockholders. When the exercise of rights or receipt of a stock dividend results in fractional share holdings, additional fractional shares may be purchased to complement the fractional shares so acquired.
  4. A banking institution may sell assets held by it as fiduciary in one account to itself as fiduciary in another account if the transaction is fair to both accounts and if the transaction is not prohibited by the terms of any governing instrument.
  5. A banking institution may make a loan to an account from the funds belonging to another account when the making of a loan to a designated account is authorized by the instrument creating the account from which the loan is made.
  6. A banking institution may make a loan to an account and may take, as security for the loan, assets of the account provided the transaction is fair to the account.

Source: S.L. 1993, ch. 67, § 4.

6-05.2-07. Custody of investments.

  1. The investment of each account must be kept separate from the assets of the banking institution and must be placed in the joint custody or control of not less than two of the officers or employees of the banking institution designated for that purpose by the board of directors or by one or more officers designated by the board. The banking institution may permit the investments of a fiduciary account to be deposited elsewhere.
  2. Except for commingled investments, the investments of each account must be kept separate from those of all other accounts or adequately identified as the property of the relevant account.

Source: S.L. 1993, ch. 67, § 4.

CHAPTER 6-06 Credit Unions

6-06-01. Savings and credit association may be organized.

Any seven residents of this state may apply to the state credit union board for permission to organize a corporate cooperative association to be known as a credit union.

Source: S.L. 1935, ch. 108, § 1; R.C. 1943, § 6-06-01; S.L. 1945, ch. 143, § 5; 1957 Supp., § 6-0601.

Cross-References.

Cooperative association law inapplicable, see § 10-15-60.

6-06-02. Manner of organization of credit unions.

A credit union must be organized in the following manner:

  1. The applicants shall execute a certificate of organization, in triplicate, by the terms of which they agree to be bound, stating the name and the location of the proposed credit union, the names and addresses of the subscribers to the certificate and the number of shares subscribed by each, and the par value of the shares of the credit union, which may not exceed fifty dollars each. The commissioner shall prescribe the application form.
  2. The applicants shall prepare and execute proposed bylaws, in triplicate, for the general governance of the credit union consistent with the provisions of this chapter.
  3. The certificate and the proposed bylaws, both executed in triplicate, must be forwarded to the commissioner.
  4. The applicants shall apply for, secure, and maintain national credit union administration insurance of accounts.
  5. The board, within thirty days after the receipt of the certificate and bylaws, shall determine whether they comply and are consistent with this chapter.
  6. The board shall instruct the secretary of state to issue a charter, which must be attached to the certificate of organization and returned, together with the bylaws, to the applicants upon payment of a filing fee of thirty dollars to the secretary of state.
  7. Evidence of securing national credit union administration insurance must be furnished to the commissioner before the charter may be released to the applicant credit union.

After the provisions of this section have been complied with, the association becomes a body corporate and is known as a credit union.

Source: S.L. 1935, ch. 108, § 1; R.C. 1943, § 6-0602; S.L. 1945, ch. 143, § 6; 1951, ch. 104, § 1; 1957 Supp., § 6-0602; S.L. 1965, ch. 90, § 3; 1977, ch. 74, §§ 1, 13; 1981, ch. 115, § 1; 1989, ch. 98, § 3; 1993, ch. 74, § 1; 1993, ch. 75, § 1; 1997, ch. 78, § 10.

6-06-03. Commissioner to furnish forms.

The commissioner, on written application of any seven residents of this state, shall furnish without charge to persons proposing to incorporate a credit union a form of certificate of organization and a set of suggested bylaws approved by the commissioner as consistent with this chapter.

Source: S.L. 1935, ch. 108, § 1; R.C. 1943, § 6-0603; S.L. 1981, ch. 115, § 2.

6-06-04. Amendment of certificate or bylaws — Approval by state credit union board.

The certificate of organization or bylaws of a credit union may be amended by the board of directors or the membership of the credit union as specified in the bylaws. If the bylaws provide for amendments by the board of directors, such amendments require an affirmative vote of two-thirds of the authorized number of members of the board of directors of the credit union at any duly held meeting of the board, if the members of the board have been given prior written notice of said meeting and the notice contains a copy of the proposed amendment or amendments. If the bylaws provide for amendments by the membership of the credit union, such amendments require an affirmative vote of two-thirds of the members present and voting at a duly called regular or special meeting of the membership, providing the members have been given prior written notice of said meeting and the notice contains a copy or summary of the proposed amendment or amendments. No amendment of the bylaws or of the certificate of organization becomes effective, until approved in writing by the state credit union board. Amendments to the certificate of organization together with a filing fee of twenty dollars must be filed with the secretary of state within thirty days after the amendments have been approved by the state credit union board.

Source: S.L. 1935, ch. 108, § 2; R.C. 1943, § 6-0604; S.L. 1945, ch. 143, § 7; 1951, ch. 104, § 2; 1957 Supp., § 6-0604; S.L. 1967, ch. 98, § 1; 1969, ch. 118, § 1; 1977, ch. 74, § 2; 1979, ch. 132, § 1; 1983, ch. 115, § 1; 1993, ch. 75, § 2.

6-06-05. Use of credit union and corporate central credit union restricted — Forfeiture.

It is unlawful for any person, association, copartnership, or corporation, domestic or foreign, except corporations organized in accordance with the provisions of this chapter, to use the words “credit union”, “corporate central credit union”, or “central credit union” in their name or title, and any person, association, copartnership, or corporation violating this section shall forfeit to the state one hundred dollars for every day, or part thereof, during which such violation continues. The commissioner may recover such forfeited sums in a civil action and shall deposit any sums recovered or collected with the state treasurer. Only one “corporate central credit union” or “central credit union” may be organized under this chapter, and no other credit union may use the term “corporate central” or “central” as part of its name. The North Dakota credit union league, any chapter, affiliate, or subsidiary of this league, and any political action committee formed by credit unions organized under this chapter or federal law or a political action committee formed by the North Dakota credit union league are specifically exempt from this restriction.

Source: S.L. 1935, ch. 108, § 3; R.C. 1943, § 6-0605; S.L. 1975, ch. 106, § 48; 1981, ch. 116, § 1; 2005, ch. 86, § 3.

6-06-06. Powers of credit unions.

A credit union has the following powers:

  1. To receive the savings of its members either as payment on shares or as deposits, including the right to conduct Christmas clubs, vacation clubs, and other such thrift organizations within its membership.
  2. To make loans to members.
  3. To make loans to a cooperative society or other organization having membership in the credit union.
  4. To deposit its moneys in financial institutions, trust companies, credit unions, corporate central credit unions, and the Bank of North Dakota authorized to receive deposits.
  5. To invest in the following:
    1. In bonds of the United States without limitation in securities issued as direct obligations by the United States government or any agency thereof and in any trust established for investing directly or collectively in such securities.
    2. In bonds or evidences of debt of this state or in bonds of states of the United States.
    3. In bonds or certificates of indebtedness of any county, city, or school district in this state, issued pursuant to authority of law, but not to exceed thirty percent of the assets of any credit union may be invested in such bonds or certificates of indebtedness.
    4. In notes or bonds secured by mortgage or deed of trust upon unencumbered, improved real estate in this state, if such investment does not exceed sixty-five percent of the market value of the property mortgaged, and fire and tornado insurance policies are maintained and deposited as collateral to such mortgage, subject to such restriction and regulations as may be imposed by the state credit union board.
    5. In notes or bonds secured by a security interest or lien upon unencumbered personal property, if the investment does not exceed ninety percent of the market value of the property secured.
    6. In first lien, public utility, industrial, corporation, or association bonds, notes, or other evidences of debt issued by corporations located in the United States of America to the extent authorized by the state credit union board.
    7. Subject to rules of the state credit union board, in shares of investment companies registered under the Investment Companies Act of 1940 and which invest only in investments otherwise permissible under this section.
    8. In investments or insurance products or in loans to the credit union employee associated with the investment or insurance product which are otherwise prohibited by this section if the investments are directly related to a benefit plan for credit union employees.
  6. To borrow money as limited in this chapter.
  7. Subject to such regulations as the state credit union board may prescribe, insurance obtained under title 1 of the National Housing Act must be deemed adequate security.
  8. To sue and be sued.
  9. A credit union may invest in a credit union office building, including the lot, piece, or parcel of land on which the same is located, and in furniture and fixtures, to the extent authorized by regulations issued by the state credit union board.
    1. Every state credit union has the power to purchase, hold, and convey other real estate as herein provided, and not otherwise:
      1. Such as is mortgaged to it in good faith by way of security for loans, or for debts previously contracted.
      2. Such as is conveyed to it in good faith in satisfaction of debts previously contracted in the course of its dealings.
      3. Such as it purchases at sales under judgments, decrees, or mortgages held by the credit union, or purchases to secure debts due to it.
    2. Upon transfer to other real estate owned, a current appraisal must be conducted by an individual who is independent of the transaction. Except as otherwise provided by chapter 10-06.1, a state credit union may hold possession of any real estate acquired under mortgage or title and possession of any real estate purchased to satisfy indebtedness, for a period not to exceed five years. The commissioner may extend the real estate holding period up to an additional five years upon formal request by a credit union if the credit union has made a good-faith attempt to dispose of the real estate within the five-year period, or disposal within the five-year period would be detrimental to the credit union. Within thirty days after receipt of an adverse decision, the credit union may appeal that decision to the state credit union board.
    3. Notwithstanding other sections of this chapter, a credit union may apply to the commissioner for authority to exchange its interest in real property acquired in satisfaction of a debt previously contracted for an interest in an entity that would dispose of the real property. If the commissioner’s decision with respect to an application is unfavorable, the applicant credit union may appeal the decision to the state credit union board by filing a notice of appeal with the commissioner within twenty business days after the commissioner has notified the applicant credit union of the decision.
  10. Subject to authorization by the state credit union board, acting by order or rule, a state credit union has the same powers as a federal credit union and may engage in any activity in which a credit union could engage if the credit union were federally chartered.
  11. To exercise any incidental power necessary or requisite to enable the credit union to carry out effectively the business for which it is incorporated or as determined by the board by order or rule.

Source: S.L. 1935, ch. 108, §§ 4, 20, subs. c; 1939, ch. 118, § 1; R.C. 1943, § 6-0606; S.L. 1951, ch. 104, § 3; 1957 Supp., § 6-0606; S.L. 1965, ch. 90, § 4; 1969, ch. 118, § 2; 1977, ch. 64, § 4; 1977, ch. 74, § 3; 1979, ch. 132, § 2; 1985, ch. 125, § 1; 1987, ch. 107, § 2; 1987, ch. 112, § 1; 1989, ch. 98, § 4; 1991, ch. 88, § 1; 1993, ch. 54, § 106; 1997, ch. 78, § 11; 2001, ch. 92, § 1; 2007, ch. 77, § 4; 2011, ch. 74, § 6; 2021, ch. 76, § 12, effective April 13, 2021.

6-06-06.1. Issuance of certificates of deposit — Penalty.

Certificates of deposit, as defined in section 41-03-04, may only be issued in this state by credit unions authorized to issue certificates of deposit, and which are organized to do business in this state under this chapter or under the Federal Credit Union Act, and whose accounts are insured by the national credit union administration, except that the requirement for insurance of accounts for any “corporate central credit union” or “central credit union” may be waived under section 6-06-40, or as authorized under section 6-03-02.2. Any person violating this section is subject to a civil penalty not to exceed five thousand dollars.

Source: S.L. 1985, ch. 119, § 3; 1991, ch. 82, § 5; 2005, ch. 86, § 4; 2007, ch. 78, § 3.

6-06-07. Membership in credit union.

  1. The membership of a credit union consists of the incorporators and such other persons as may be elected to membership. Each member shall subscribe to and pay the initial installment on at least one share in the credit union and pay the entrance fee as provided by the bylaws of the credit union. Organizations, incorporated or otherwise, composed principally of the same general group as the credit union membership may be members of the credit union.
  2. Credit union membership is limited to groups having a common bond of occupation or association or to groups residing within a geographic area that does not extend beyond a seventy-five mile [120.70 kilometer] radius of the home office of the credit union. Except as provided by this section, an office of a credit union that has a field of membership defined by geography may not be located more than seventy-five miles [120.70 kilometers] from the credit union main office. The restrictions on location and field of membership under this section do not apply to a credit union office location or field of membership approved by the board before January 1, 2005. In the event of a merger between credit unions with different geographic fields of membership, the surviving credit union may expand the field of membership to include the geographic field of membership of the merged credit union. After December 31, 2004, a credit union may not establish and operate a new branch office that is outside the credit union’s field of membership. A branch office may not expand the geographic field of membership of a credit union.
  3. The board shall adopt a procedure through which all interested persons, including banking institutions and credit unions, are afforded reasonable opportunity to submit data, views, or arguments, orally or in writing; to obtain a hearing; and to intervene as a party to a proceeding concerning a proposed application for a credit union to expand the credit union’s field of membership.

Source: S.L. 1935, ch. 108, § 5; R.C. 1943, § 6-0607; S.L. 1977, ch. 74, § 4; 1997, ch. 85, § 1; 2005, ch. 87, § 1.

6-06-08. State credit union board to supervise credit unions — Reports — Examinations — Fees.

  1. Credit unions and the permanent loan funds of credit unions, if any, are under the supervision of the commissioner. Credit unions shall report to the commissioner when called by the commissioner and at least four times each year. The commissioner shall prescribe the forms for the reports. At the discretion of the commissioner, a call may be complied with by submission of a copy of the call report electronic mail directly to the department of financial institutions or by other electronic means of transmission. The call reports are due within thirty days of the call, or according to the deadlines published on the form NCUA 5300, whichever comes first. The commissioner may call for special reports from any credit union whenever in the commissioner’s judgment it is necessary to obtain complete knowledge of the condition of the credit union. Every credit union that fails to make and transmit any report required in pursuance of this section shall forfeit and pay to the state a penalty of up to five hundred dollars for each day of delinquency, not to exceed two thousand five hundred dollars. At the discretion of the commissioner, all or part of this penalty may be waived if the reports are submitted within three days after the due date required by this section.
  2. Credit unions must be examined at least once each twenty-four months by the commissioner. In lieu of the examinations herein required, the commissioner may accept any examination made or obtained by the national credit union administration and may conduct a joint examination with the national credit union administration.
  3. If it is determined through an examination or otherwise that the credit union is violating the provisions of this chapter, or is insolvent, the state credit union board may serve notice on the credit union of its intention to revoke the charter. If such violations continue for a period of fifteen days after such notice, the board may revoke the charter and take possession of the business and property of such credit union and shall maintain possession then until such time as it permits the reinstatement of the charter and the continuation of business by the credit union, or until its affairs finally are liquidated. The board may take similar action if any required report remains in arrears for more than fifteen days.
  4. Every state credit union placed under the jurisdiction and control of the state credit union board and the commissioner by the provisions of this title shall pay a semiannual assessment. This assessment is to be determined by the state credit union board as necessary to fund that portion of the department’s budget relating to the regulation of state-chartered credit unions. The assessment must be paid to the state treasurer within thirty days of each June thirtieth and December thirty-first. The state treasurer shall report the payments of fees to the commissioner, and if any credit union is delinquent more than twenty days in making payment, the board may seek other administrative remedies until payment of the amount due. The commissioner may assess a penalty of one percent of the outstanding assessment fee for each day that the penalty is delinquent. All fees and penalties under this section must be paid to the state treasurer and deposited in the financial institutions regulatory fund.
  5. If the commissioner determines more than one visit, inspection, or examination is necessary to promote the safety and soundness of a credit union during a twelve-month period, the credit union shall pay to the department a fee for the time used by the commissioner or other person designated by the commissioner in supervising, filing, and corresponding in connection with each additional visit, inspection, or examination and report of examination and for time used by each examiner or other person in making and otherwise preparing and typing the reports of examination provided for under this section. Fees for the visit, inspection, or examination must be charged by the department of financial institutions at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the visit, inspection, or examination provided for by this section. A credit union shall pay this fee within ten days of receiving a billing from the commissioner. Fees must be deposited in the financial institutions regulatory fund.

Source: S.L. 1935, ch. 108, § 6; 1937, ch. 114, § 1; 1939, ch. 117, § 1; 1939, ch. 118, § 7; R.C. 1943, § 6-0608; S.L. 1945, ch. 143, § 8; 1951, ch. 104, § 4; 1957 Supp., § 6-0608; S.L. 1959, ch. 104, § 1; 1965, ch. 90, § 5; 1967, ch. 89, § 1; 1971, ch. 102, § 2; 1977, ch. 73, § 1; 1979, ch. 133, § 1; 1981, ch. 113, § 2; 1981, ch. 117, § 1; 1983, ch. 110, § 4; 1987, ch. 10, § 5; 1987, ch. 113, § 1; 1989, ch. 96, § 7; 1989, ch. 98, § 5; 1997, ch. 78, § 12; 1997, ch. 86, § 1; 2001, ch. 88, § 20; 2005, ch. 86, § 5; 2009, ch. 99, § 1; 2015, ch. 80, § 6, § 6, effective July 1, 2015; 2021, ch. 76, § 13, effective April 13, 2021.

6-06-08.1. Additional assessments of credit unions. [Repealed]

Repealed by S.L. 1989, ch. 96, § 20.

6-06-08.2. Failing institution — Emergency powers — Hearing — Order — Appeal.

Whenever the state credit union board determines that a merger or acquisition of any of the credit unions under its supervision is necessary because the institution’s equity is impaired, it is conducting its business in an unsafe, unsound, or unauthorized manner, or it is endangering the interests of shareholders, creditors, or the public, whether or not the institution is insolvent, the state credit union board may, without a hearing, declare an emergency and declare that the institution is a failing institution. Upon such declaration, the state credit union board may authorize the commissioner of financial institutions to immediately take possession of the institution. The board is authorized to do all things necessary to continue service to the affected community, including any merger or acquisition under this chapter or otherwise.

An institution which is the subject of such a board declaration may ask for a hearing before the state credit union board within five days after service of the state credit union board’s declaration upon it. The application for a hearing must be granted and the hearing must be held not later than ten days after the application is filed. A complete record of the hearing must be established and maintained. On the basis of the hearing, the board shall enter a final order. The institution may appeal the order to the district court of the county in which the credit union is located within ten days after the order is served upon it. The appeal is governed by chapter 28-32 except that the board has ten days after service of the notice of appeal to certify the record, and the district court shall hear the appeal as expeditiously as possible.

Source: S.L. 1987, ch. 114, § 1; 2001, ch. 88, § 21.

6-06-08.3. Examination of credit union computer servicers.

The commissioner may conduct an examination or inspect the records and operation of any computer servicer providing data processing services for any credit union under the department of financial institutions’ jurisdiction.

Source: S.L. 1995, ch. 89, § 1; 2001, ch. 88, § 22.

6-06-08.4. Prompt corrective action.

  1. For purposes of this section, the net worth categories are defined as:
    1. Well capitalized. A credit union with a net worth ratio of seven percent or greater which meets any applicable risk-based net worth requirement.
    2. Adequately capitalized. A credit union with a net worth ratio six percent or more but less than seven percent which meets any applicable risk-based net worth requirement as defined by the state credit union board by rule.
    3. Undercapitalized. A credit union with a net worth ratio of four percent or more but less than six percent or fails to meet any risk-based net worth requirement.
    4. Significantly undercapitalized. A credit union with a net worth ratio of two percent or more but less than four percent, fails to increase its net worth, or fails to submit or materially implement a net worth restoration plan.
    5. Critically undercapitalized. A credit union with a net worth ratio less than two percent.
  2. A credit union may be reclassified into the next subordinate net worth category by the commissioner or the state credit union board if it is determined that the credit union is in an unsafe or unsound condition or has not corrected unsafe or unsound practices of which it was, or should have been, aware. The board or commissioner may order a credit union that is adequately capitalized, undercapitalized, significantly undercapitalized, or critically undercapitalized to take prompt corrective action to increase the credit union’s net worth. Additionally, the order may require a credit union that is undercapitalized, significantly undercapitalized, or critically undercapitalized to submit an acceptable net worth restoration plan to the commissioner. A credit union may request a hearing before the state credit union board within ten days of the order to review the factual basis used to issue the request for prompt corrective action. The decision made by the board during this hearing is final. If a hearing is not requested, the initial decision of the commissioner or board is final. For a significantly undercapitalized credit union that has no reasonable prospect of becoming adequately capitalized or a critically undercapitalized credit union, the commissioner or board may take possession of the credit union or appoint a conservator or liquidating agent for the credit union in accordance with chapter 6-07.2.

Source: S.L. 1999, ch. 76, § 1; 2011, ch. 74, § 7; 2021, ch. 77, § 8, effective August 1, 2021.

6-06-08.5. Corporate central credit union records.

A North Dakota federally chartered corporate credit union must allow access or produce any records requested by the commissioner which the commissioner determines necessary to conduct an examination of the state-chartered credit union. A federally chartered corporate credit union is entitled to be reimbursed for any search and processing time at the rate of ten dollars per hour per person and for copies made of any records at the rate of fifteen cents per page.

Source: S.L. 2001, ch. 93, § 1.

6-06-09. Fiscal year of credit unions.

The fiscal year of all credit unions ends December thirty-first.

Source: S.L. 1935, ch. 108, § 7; R.C. 1943, § 6-0609.

6-06-10. General and special meetings — Notice — Quorum — Voting privileges.

General and special meetings may be held in the manner and for the purposes indicated in the bylaws of the credit union. Ten days before any regular or special meeting, written notice thereof must be mailed or sent by an electronic communication to each member and, in the case of a special meeting, the notice must state clearly the purpose of the meeting and what matters will be considered thereat. The members present at a general or special meeting constitute a quorum for the transaction of the business of the credit union. At all meetings, a member has but a single vote, whatever the member’s shareholdings. There is no voting by proxy, but any firm, society, or corporation having a membership in the credit union may cast its vote by one person upon presentation by that person to the credit union of written authority from such firm, society, or corporation. The credit union may allow members to vote by mail ballot or electronic ballot for directors and committee members.

Source: S.L. 1935, ch. 108, §§ 2, 7; R.C. 1943, § 6-0610; S.L. 1965, ch. 90, § 6; 1993, ch. 76, § 1; 2011, ch. 74, § 8.

6-06-11. Annual meetings — Election of directors — Election or appointment of committees.

  1. The organization meeting of the members of a credit union shall be the first annual meeting. At its annual meeting, its members shall elect a board of directors of not less than five members and a credit committee of not less than three members, unless the bylaws of the credit union provide that the credit union may not have a credit committee. A supervisory committee of not less than three members must be elected at the annual meeting, unless the bylaws of the credit union provide that the supervisory committee members be appointed by the board of directors of the credit union or the bylaws provide that the credit union may not have a supervisory committee. In the event the bylaws do not provide for a supervisory committee, then the duties and powers of a supervisory committee, as described in section 6-06-15, are the responsibility of the board of directors. The directors and committee members if any, shall hold office for such terms, respectively, as provided by the bylaws of the credit union and until their successors qualify. A record of the names and addresses of the officers and members of the board and committees must be filed with the commissioner within ten days after their election or appointment. Notice of any change in membership on the board or committees by appointment to fill an unexpired term or otherwise must be filed with the commissioner within ten days of such change. The notice requirement is satisfied if the national credit union association’s call report profile is updated within the ten-day reporting requirement.
  2. If the bylaws of the credit union provide for a credit committee, then pursuant to the provisions of the bylaws, the board of directors may appoint or the members may elect a credit committee which consists of an odd number of members of the credit union, but which may not include more than one loan officer. The method used must be set forth in the bylaws.
  3. If the credit committee is dispensed with in the bylaws, a credit manager, under the general supervision of the board of directors, may be empowered to approve or disapprove loans subject to the policies and conditions prescribed by the board of directors. The president or other qualified senior management official may serve as the credit manager. If a credit manager is provided in lieu of an elected credit committee, the credit manager may appoint one or more loan officers with the power to approve or disapprove loans, and may establish an internal credit committee comprised of designated credit union staff with the power to approve or disapprove loans, subject to such limitations or conditions as the credit manager and board of directors prescribes.

Source: S.L. 1935, ch. 108, § 8; 1937, ch. 113, § 1; R.C. 1943, § 6-0611; S.L. 1959, ch. 104, § 2; 1977, ch. 74, § 5; 1979, ch. 134, § 1; 1983, ch. 115, § 2; 2011, ch. 74, § 9; 2021, ch. 76, § 14, effective April 13, 2021.

6-06-12. Directors — Duties and powers — Loan limitations.

  1. The directors shall have general management of the credit union, and it is their duty particularly:
    1. To act on applications for membership, unless a membership officer is appointed.
    2. To determine interest rates on loans and deposits or designate a representative to determine these rates.
    3. To fix, subject to the approval of the commissioner, the amount of surety bond which must be required of all officers and employees handling money.
    4. To declare dividends.
    5. To transmit to the members recommendations for changes in the bylaws.
    6. To fill vacancies on the board of directors and on the credit committee who shall serve until their successors are chosen and qualified.
    7. To determine the maximum individual shareholdings and the maximum aggregate liability to the credit union of any one borrower but such maximum aggregate liability allowed by the board may not exceed the amounts listed in the following schedule:
    8. To supervise and control investments other than loans to members.
    9. To establish a schedule of fines for delinquency in the payment of principal or interest, which the board shall impose at its discretion.
  2. The board may appoint membership officers authorized to approve applications for membership under such conditions as the board may prescribe; except that such membership officers so authorized shall submit to the board at each monthly meeting a list of approved or pending applications for membership received since the previous monthly meeting, together with such other related information as the bylaws or the board may require.
  3. No immediate family member of the president, general manager, or chief executive officer of the credit union may serve on the board of directors of the credit union.
  4. A majority of the board of directors of a credit union may not be immediate family members of each other.

Total Assets Loan Limit 0 to 70,000 10% with a limit of 5,000 70,001 to 100,000 6,000 limit 100,001 to 200,000 8,000 limit 200,001 to 300,000 10,000 limit 300,001 to 400,000 12,000 limit 400,001 to 500,000 14,000 limit over 500,000 3% of assets

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For purposes of this subsection, the aggregate liability of one borrower to a credit union includes the total direct, indirect, and contingent liabilities of the borrower, and the liabilities of separate borrowers for which the repayment of separate loans or extensions of credit is substantially from the same source. The aggregate liability of any one borrower to the credit union does not include any loan or portion of a loan guaranteed by the government, to the extent of the guarantee, nor any loan secured by shares in the credit union, to the extent of the security.

In all cases a credit union is allowed to loan up to and including two hundred dollars to any individual regardless of the amount of total assets in said credit union. Provided, that the foregoing provisions do not apply to the North Dakota central credit union.

Source: S.L. 1935, ch. 108, § 9; 1939, ch. 117, § 2; R.C. 1943, § 6-0612; S.L. 1951, ch. 104, § 5; 1957 Supp., § 6-0612; S.L. 1973, ch. 70, § 1; 1975, ch. 74, § 1; 1977, ch. 74, § 6; 1987, ch. 115, § 1; 2005, ch. 86, § 6.

Cross-References.

Assessment of civil money penalties, see § 6-01-04.3.

6-06-13. Officers — Elections — Duties.

At their organizational meeting and within thirty days following each annual meeting of the members, the directors shall elect from their own number an executive officer, who may be designated as chairman of the board or president, a vice chairman of the board or one or more vice presidents, a treasurer, and a secretary. The treasurer and the secretary may be the same individual. The persons so elected are the executive officers of the corporation. The terms of the officers must be one year, or until their successors are chosen and have duly qualified. The duties of the officers must be prescribed in the bylaws. The board of directors may employ an officer in charge of operations whose title must be president, chief executive officer, general manager, or any combination thereof, or, in lieu thereof, the board of directors may designate the treasurer or an assistant treasurer to act as general manager and be in active charge of the affairs of the credit union.

Source: S.L. 1935, ch. 108, § 9; 1939, ch. 117, § 2; R.C. 1943, § 6-0613; S.L. 1951, ch. 104, § 6; 1957 Supp., § 6-0613; S.L. 1977, ch. 74, § 7; 1981, ch. 118, § 1; 2005, ch. 86, § 7.

6-06-13.1. Credit union volunteers — Immunity.

A person who serves as a volunteer, including a director, credit committee member, or supervisory committee member, of a federal or state-chartered credit union is immune from civil liability for any act or omission resulting in damage or injury if at the time of the act or omission all of the following are met:

  1. The volunteer was acting in good faith and in the scope of that person’s official duties as a volunteer of the credit union.
  2. The act or omission did not constitute willful misconduct or gross negligence on the part of the volunteer.
  3. The volunteer did not receive or expect to receive reimbursement for or payment of expenses in excess of five thousand dollars per year for expenses actually incurred as a result of providing services as a volunteer of the credit union and did not receive or expect to receive compensation or anything in lieu of compensation as payment for services provided as a volunteer of the credit union.

This section does not grant immunity to any person causing damage as the result of the negligent operation of a motor vehicle.

Source: S.L. 1997, ch. 87, § 1; 2005, ch. 86, § 8.

6-06-14. Loans — How made — Security — Meetings and duties of credit committee — Preferential loans. [Repealed]

Source: S.L. 1935, ch. 108, § 10; 1939, ch. 117, § 3; R.C. 1943, § 6-0614; S.L. 1947, ch. 111, § 1; 1955, ch. 102, § 1; 1957 Supp., § 6-0614; S.L. 1961, ch. 109, § 1; 1965, ch. 90, § 7; 1969, ch. 118, § 3; 1973, ch. 70, § 2; 1975, ch. 74, § 2; 1979, ch. 132, § 3; 1981, ch. 115, § 3; 1981, ch. 116, § 2; 1987, ch. 116, § 1; 1999, ch. 77, § 1; 2003, ch. 69, § 1; 2005, ch. 86, § 9; 2011, ch. 74, § 10; repealed by 2021, ch. 76, § 17, effective April 13, 2021.

6-06-14.1. Loans — How made — Security — Meetings and duties of loan administration — Preferential loans.

  1. The duty of loan administration falls to the credit committee if the bylaws establish a credit committee, or to the credit manager appointed by the board of directors if the bylaws do not provide for a credit committee. At a minimum, loan administration must include:
    1. Oversight over all loans.
    2. Performance of loan-related duties as often as necessary, and in the case of a credit committee, a meeting at least once each month. Each member of the credit committee must receive prior notice of the time and location of a meeting.
    3. Loan applications, notes, security instruments, and all other loan documentation necessary to execute the transaction on forms approved by the committee or credit manager which set forth the purpose for which the loan is desired, the security, if any, which is offered, and such other data as the committee or credit manager may require.
    4. Documentation that the loan complies with board of directors-approved loan policies, including policy limits on the maximum unsecured loans to one borrower and the limit on maximum total loans to a borrower.
    5. Documented approval or denial of the loan by the majority of the entire credit committee or by the credit manager, except that the credit committee or credit manager may appoint and delegate to one or more loan officers the power to approve loans up to the limit established by the board of directors.
    6. Sufficient segregation of duties to limit risk or error if possible. At a minimum, an individual may not disburse funds of the credit union for any loan that has been approved by that individual in that individual’s capacity as a loan officer.
  2. Not more than one member of the credit committee may be appointed as a loan officer, unless credit union bylaws provide for a board of directors-appointed credit manager and the credit committee is made up of credit union employees appointed by the credit manager.
  3. Every loan by a credit union to, or guaranteed by, its directors, officers, managers, and committee members must:
    1. Be current as outlined on the terms of the loan agreement.
    2. Be made on substantially the same terms, including interest rates, fee structure, and collateral, as those prevailing at the time for comparable transactions with other persons.
    3. Be written in strict conformity with the credit union’s policies, rules, and regulations.
  4. An exception may be made for a loan otherwise prohibited by this section if the loan is directly related to a retirement investment benefit plan for credit union employees.

Source: S.L. 2021, ch. 76, § 16, effective April 13, 2021.

6-06-15. Duties and powers of supervisory committee.

The supervisory committee, by a majority vote, may call a special meeting of the members of the credit union to consider any matter which it wishes to submit to the membership. The supervisory committee shall:

  1. Fill vacancies in the committee’s own membership.
  2. Make an examination of the affairs of the credit union, including an audit of the credit union’s books, at least annually, and the committee may submit such report to the members of the credit union at a meeting called for that purpose by the committee whenever the committee deems such action necessary.
  3. Make an annual audit and report and submit the audit and report at the annual meeting of the credit union.
  4. Suspend any officer, director, or member of any committee when by unanimous, not including the person who is being considered for suspension, vote of the committee, such action is determined to be necessary to the proper conduct of the credit union, but upon taking such action, the committee shall call the members of the credit union together immediately to act on the suspension, and the members at the meeting may sustain the suspension and remove the officer permanently or may reinstate the officer, director, or committee member.
  5. The commissioner may reject a supervisory committee examination or audit if the examination or audit is determined to be unsatisfactory.

If the bylaws do not provide for the election or appointment of a supervisory committee, the duties and powers described above are the responsibility of and delegated to the board of directors.

Source: S.L. 1935, ch. 108, § 11; R.C. 1943, § 6-0615; S.L. 1977, ch. 74, § 8; 1983, ch. 115, § 3; 1997, ch. 86, § 2.

6-06-16. Entrance fee — Capital — Lien on shares — Assessment on shares.

A credit union may charge such entrance fee as may be provided by its bylaws. Its capital consists of the entrance fees paid in and the payments made to it by the several members on shares therein. The credit union has a lien on the shares and deposits of a member for any sum due to the credit union from that member or for the amount due on any loan endorsed by that member. A credit union that is a member of the North Dakota credit union league may, by resolution adopted with a quorum present at a regular or special meeting of the board of directors of the credit union, annually assess against the share accounts of all members of the credit union an amount equal to the whole or proportionate part of the annual membership fee payable to the North Dakota credit union league.

Source: S.L. 1935, ch. 108, § 12; R.C. 1943, § 6-0616; S.L. 1953, ch. 99, § 1; 1957 Supp., § 6-0616; S.L. 1977, ch. 74, § 9.

6-06-17. Shares may be issued to minor or in trust.

Shares may be issued and deposits received in the name of a minor, or in trust, in such manner as the bylaws may provide. The name of the beneficiary must be disclosed to the credit union.

Source: S.L. 1935, ch. 108, § 13; R.C. 1943, § 6-0617.

6-06-18. Interest rates. [Repealed]

Repealed by S.L. 1997, ch. 78, § 16.

6-06-19. Authority to borrow — Limitation — Exception.

A credit union may borrow money from any source, but the total borrowings may not exceed twenty-five percent of the credit union’s assets unless the commissioner authorizes a larger amount. The board or commissioner may suspend or restrict the borrowing powers of a credit union. The limitation on borrowing does not apply to a corporate central credit union which is limited to borrowing up to five times the corporate central credit union’s capital, surplus, and reserve fund. For purposes of this section, capital, surplus, and reserve fund for a corporate central credit union includes statutory or regulatory reserves, reserves established for contingencies or any other purposes, undivided earnings, all sums on deposit by other credit unions which are membership capital share deposits as defined by the bylaws of the corporate central credit union, or any other funds being held by the corporate central credit union for the purpose of maintaining a capital base. A credit union must provide within one week written notification to the commissioner of the amount, terms, and source of all borrowings under this section. Written notification is not required if the borrowings are provided by the corporate central credit union and that information is available to the commissioner through electronic inquiry.

Source: S.L. 1935, ch. 108, § 15; R.C. 1943, § 6-0619; S.L. 1979, ch. 135, § 2; 1981, ch. 115, § 4; 1983, ch. 115, § 4; 1997, ch. 78, § 13; 1997, ch. 86, § 3; 2005, ch. 86, § 10.

6-06-20. Borrowings of directors and committee members limited — Repayment of loans.

A director or member of any committee may not borrow from the credit union in which the director or member holds office more than one hundred thousand dollars plus pledged shares and deposits less any loan balance therein, unless the application is approved by three-fourths of the other members of the board of directors. The director or member may guarantee or endorse paper for other borrowers. A borrower may repay the borrower’s loan in whole or in part on any day that the office of the credit union is open for business.

Source: S.L. 1935, ch. 108, § 16; R.C. 1943, § 6-0620; S.L. 1975, ch. 74, § 3; 1987, ch. 117, § 1; 1995, ch. 90, § 1; 1997, ch. 88, § 1; 2005, ch. 86, § 11.

Collateral References.

Construction and application of statutes prohibiting or limiting loans to bank’s officers or directors, 49 A.L.R.3d 727.

6-06-21. Reserve fund.

Every credit union, including corporate central credit unions, shall maintain an allowance for loan and lease loss account in accordance with generally accepted accounting principles and rules of the national credit union administration. If it is found through an examination that the allowance for loan and lease loss account is not sufficient in disclosing the exposure to loan losses, then the credit union will increase the allowance for loan and lease loss account within thirty days as directed by the commissioner.

Source: S.L. 1935, ch. 108, § 17; 1939, ch. 117, § 4; R.C. 1943, § 6-0621; S.L. 1965, ch. 90, § 8; 1979, ch. 135, § 3; 1983, ch. 115, § 5; 1993, ch. 76, § 2; 2003, ch. 70, § 1; 2005, ch. 86, § 12.

6-06-21.1. Amount and manner of establishing special reserves for delinquent loans and investments. [Repealed]

Repealed by S.L. 2005, ch. 86, § 16.

6-06-21.2. Agricultural loan amortization and deferral. [Expired]

Expired under S.L. 1989, ch. 99, § 3.

6-06-22. Permanent loan fund — Amount — How obtained — Ownership. [Repealed]

Repealed by S.L. 1965, ch. 90, § 11.

6-06-23. Use of permanent loan fund — To whom loaned and regulating making of loans. [Repealed]

Repealed by S.L. 1965, ch. 90, § 11.

6-06-24. Renewal of loan from permanent loan fund — Foreclosure. [Repealed]

Repealed by S.L. 1965, ch. 90, § 11.

6-06-25. Rate of interest — Use of interest — Permanent loan fund loans. [Repealed]

Repealed by S.L. 1965, ch. 90, § 11.

6-06-26. Dividends.

A credit union’s board of directors may declare and pay a dividend on shares from current or accumulated net earnings, or both, but only after providing for required reserves, accrued and unpaid expenses, and established loan and lease losses. A credit union may pay a dividend on partial or full shares and may pay the dividend at differing levels and at differing intervals based on the type of share accounts owned by a member, the liquidation priority of share accounts, and the balances of a member’s share accounts. A credit union may determine the rate and amount of a dividend before the end of the dividend period involved. A credit union, upon action of its board of directors, may authorize an interest refund to members of record at the close of business the last day of any dividend period in proportion to the interest paid during that dividend period. A credit union shall not pay a dividend if payment would result in the insolvency of the credit union.

Source: S.L. 1935, ch. 108, § 18; 1939, ch. 117, § 5; R.C. 1943, § 6-0626; S.L. 1951, ch. 104, § 7; 1957 Supp., § 6-0626; S.L. 1965, ch. 90, § 10; 1975, ch. 70, § 3; 1981, ch. 119, § 2; 1997, ch. 78, § 15; 2005, ch. 86, § 13.

6-06-27. Notice of intention to withdraw shares and deposits.

A credit union may require sixty days’ notice of intention to withdraw shares and thirty days’ notice of intention to withdraw deposits. Withdrawing members have no further rights in the credit union, but are not released from any remaining liability to it by such withdrawal. All amounts paid on shares or as deposits by a withdrawing member, and any dividends or interest credited to that member to the date of withdrawal, after all sums due from the member to the credit union have been deducted, must be repaid to the member as funds become available.

Source: S.L. 1935, ch. 108, § 19; R.C. 1943, § 6-0627; S.L. 1983, ch. 115, § 6.

6-06-28. May change place of business.

A credit union may change its place of business on written permission of the commissioner.

Source: S.L. 1935, ch. 108, § 21; R.C. 1943, § 6-0628.

6-06-29. Taxation of credit unions.

Any credit union organized under this chapter or under the Federal Credit Union Act is exempt from all taxation now or hereafter imposed by the state or any municipality within the state or any local taxing authority and no law which taxes corporations in any form, or the shares thereof, or the accumulations thereon, shall apply to any such credit union, except that any real property and any tangible personal property owned by any credit union organized under this chapter or under the Federal Credit Union Act is subject to taxation to the same extent as other similar property is taxed and purchases by credit unions are subject to sales or use tax. The shares of credit unions are not subject to any stock transfer tax, either when issued or when transferred from one member to another. The participation by the credit union in any unemployment insurance funds, or social security fund, or old-age fund may not be deemed a waiver of the tax immunities hereby granted.

Source: S.L. 1935, ch. 108, § 22; R.C. 1943, § 6-0629; S.L. 1961, ch. 109, § 2; 1989, ch. 105, § 1.

Note.

The Federal Credit Union Act is compiled as 12 USCS § 1751 et seq.

6-06-30. Voluntary liquidation authorized — Qualification of liquidating committee. [Repealed]

Repealed by S.L. 1967, ch. 90, § 13.

Note.

For present provisions, see ch. 6-06.1.

6-06-31. Notice of dissolution to state examiner — Filing examiner’s certificates — When dissolution complete. [Repealed]

Repealed by S.L. 1967, ch. 90, § 13.

6-06-32. Duty of committee when liquidation completed — State examiner custodian of books and papers. [Repealed]

Repealed by S.L. 1967, ch. 90, § 13.

6-06-33. Liquidation by the commissioner.

If the commissioner finds that a credit union is insolvent when the commissioner receives notice of its intention to dissolve, or if a credit union in the process of voluntary dissolution is not liquidated completely and its assets distributed within three years after the special meeting at which the dissolution was voted, the commissioner shall take possession of the books, records, and assets of the union and proceed to complete the liquidation in the manner provided in this title for the liquidation of closed banks.

Source: S.L. 1935, ch. 108, § 20, subs. d; R.C. 1943, § 6-0633.

Cross-References.

Liquidation of banks, see ch. 6-07.

Voluntary liquidation of credit unions, see ch. 6-06.1.

6-06-34. Unclaimed dividends of credit unions.

The commissioner shall transfer all unpaid dividends to the commissioner of university and school lands. The commissioner of university and school lands is authorized to issue a voucher for the payment of such dividends to the persons respectively entitled thereto, in accordance with the escheat and abandoned property laws of the state.

Source: S.L. 1935, ch. 108, § 20, subs. e; R.C. 1943, § 6-0634; S.L. 1959, ch. 212, § 10; 1977, ch. 75, § 1.

6-06-35. Conversion from state to federal credit union and from federal to state credit union and from state credit union to building and loan association.

  1. A state credit union may be converted into a federal credit union under the laws of the United States by complying with the following requirements:
    1. The proposition for such conversion must first be approved, and a date set for a vote thereon by the members either at a meeting to be held on such date or by written ballot to be filed on or before such date, by a majority of the directors of the state credit union. Written notice of the proposition and of the date set for the vote must then be delivered in person to each member or mailed to each member at the address for such member appearing on the records of the credit union, not more than thirty nor less than seven days prior to such date. Approval of the proposition for conversion must be by the affirmative vote of two-thirds of the members present at the meeting.
    2. A statement of the results of the vote, verified by the affidavits of the president or vice president and the secretary, must be filed with the state credit union board within ten days after the vote is taken.
    3. Promptly after the vote is taken and in no event later than ninety days thereafter, if the proposition for conversion was approved by such vote, the credit union shall take such action as may be necessary under the applicable federal law to make it a federal credit union, and within ten days after receipt of the federal credit union charter there must be filed with the state credit union board a copy of the charter thus issued. Upon such filing, the credit union must cease to be a state credit union.
    4. Upon ceasing to be a state credit union, such credit union is no longer subject to any of the provisions of the North Dakota credit union law. The successor federal credit union is vested with all of the assets and shall continue to be responsible for all of the obligations of the state credit union to the same extent as though the conversion had not taken place.
    1. A federal credit union, organized under the laws of the United States may be converted into a state credit union by:
      1. Complying with all federal requirements requisite to enabling it to convert to a state credit union or to cease being a federal credit union;
      2. Filing with the state credit union board proof of such compliance, satisfactory to the commissioner;
      3. Filing with the commissioner an organization certificate and bylaws, both in triplicate, as required by section 6-06-02; and
      4. Granting discretionary authority to the commissioner to conduct an examination prior to the conversion date.
    2. When the commissioner has been satisfied that all of such requirements and all other requirements of the North Dakota law have been complied with, the commissioner shall notify the applicants and the state credit union board of that fact, and the board shall instruct the secretary of state to issue a charter in accordance with section 6-06-02. Upon issuance of the charter, the federal credit union shall become a state credit union and ceases to be a federal credit union. The state credit union is vested with all of the assets and shall continue to be responsible for all of the obligations of the federal credit union to the same extent as though the conversion had not taken place.
  2. After July 31, 2009, a state credit union may convert to a building and loan association by complying with the following requirements:
    1. The proposal for a conversion first must be approved and a date set for a vote on the proposal by the members either at a meeting to be held on such date or by written ballot to be filed on or before such date by a majority of the directors of the credit union. Approval of the proposal for the conversion must be by the affirmative vote of two-thirds of the members voting.
    2. A state credit union that proposes to convert to a building and loan association shall submit notice to each of the credit union’s members who are eligible to vote on the matter of the credit union’s intent to convert:
      1. Ninety days before the date of the member vote on the conversion;
      2. Sixty days before the date of the member vote on the conversion; and
      3. Thirty days before the date of the member vote on the conversion.
    3. A state credit union that proposes to convert to a building and loan association shall submit a notice to the state credit union board of the credit union’s intent to convert at least ninety days before the date of the completion of the conversion.
    4. Upon completion of a conversion, the state credit union is no longer subject to any of the provisions of this chapter.
    5. A director or senior management official of a state credit union may not receive any economic benefit in connection with a conversion of the state credit union other than reasonable director fees and reasonable compensation and other benefits paid to directors or senior management officials of the converted institution in the ordinary course of business. As used in this subdivision, the term senior management official means a chief executive officer, an assistant chief executive officer, a chief financial officer, and any other senior executive officer as may be defined by the state credit union board.
    6. Before January 1, 2009, the state credit union board shall adopt rules applicable to state credit union conversion to a building and loan association which are consistent with the conversion rules of the national credit union administration.
    7. The commissioner shall review the methodology by which the conversion member vote was taken and procedures applicable to the member vote. The commissioner shall report the commissioner’s findings to the state credit union board. If the commissioner or the state credit union board disapproves of the methods by which the conversion member vote was taken or procedures applicable to the member vote, the member vote must be retaken as directed by the commissioner or the state credit union board.

The commissioner shall set fees for such examination at an hourly rate sufficient to cover all reasonable expenses of the department of financial institutions associated with the examination. Fees must be collected by the commissioner, transferred to the state treasurer, and deposited in the financial institutions regulatory fund.

Source: S.L. 1961, ch. 109, § 3; 1977, ch. 74, § 10; 1981, ch. 115, § 5; 1989, ch. 98, § 6; 1991, ch. 85, § 3; 2001, ch. 88, § 23; 2007, ch. 78, § 4.

Cross-References.

Federal Credit Union Act, see 12 USCS § 1751 et seq.

6-06-36. Merger.

Any credit union chartered under this chapter or under Act of Congress may merge under rules and regulations established by the state credit union board. A federal credit union proposing to merge into a state-chartered credit union shall grant the commissioner discretionary authority to conduct an examination. The commissioner shall set fees for such examination at an hourly rate sufficient to cover all reasonable expenses of the department of financial institutions associated with the examination. Fees must be collected by the commissioner, transferred to the state treasurer, and deposited in the financial institutions regulatory fund. The secretary of state shall charge a fee of fifty dollars for all services in connection with a merger authorized by the state credit union board, including filing of a certificate of organization or bylaws, and issuing or canceling charters.

Upon approval by the state credit union board of a merger application under this section, the former main office and facilities of the credit union merged will become branches of the continuing credit union and the continuing credit union is not required to file an application for any branches acquired in the merger transaction.

Source: S.L. 1965, ch. 90, § 1; 1991, ch. 85, § 4; 1993, ch. 75, § 3; 2001, ch. 88, § 24; 2011, ch. 74, § 11.

6-06-37. Rules and regulations.

The state credit union board shall prescribe rules and regulations regarding the merger, consolidation, and dissolution of corporations organized under this chapter and Acts of Congress.

Source: S.L. 1965, ch. 90, § 2.

6-06-38. Destruction of records.

No credit union may be required to preserve and retain its records of accounts or files, except share and deposit files, for a longer period than six years next after the first day of January of the year following the final date of the termination of such accounts or files. No credit union may be required to preserve and retain its share and deposit account records and files for a longer period than two years next after the first day of January of the year following the date of the death of the shareholder or depositholder. All credit unions shall, however, keep sufficient records to satisfy the reporting requirements of the escheat and abandoned property laws of the state.

Source: S.L. 1975, ch. 74, § 4; 1977, ch. 75, § 2.

6-06-39. Share scaledown. [Repealed]

Repealed by S.L. 2005, ch. 86, § 16.

6-06-40. Share insurance exception.

A central credit union with corporate shareholdings equal to or in excess of seventy-five percent of its total assets may by vote of its board of directors elect exemption of insurance of share and deposit accounts under provisions of title II of the Federal Credit Union Act.

Source: S.L. 1977, ch. 74, § 12; 1981, ch. 115, § 6.

6-06-41. Depository credit union — Endorsements.

A depository credit union that has taken a check or draft for collection may supply any endorsement of the member which is necessary to title unless the item contains the words “payee’s endorsement required” or words to that effect. In the absence of such a requirement, a statement placed on the item by the depository credit union to the effect that the item was deposited by a member or credited to that member’s account is effective as the member’s endorsement. An intermediary credit union, or payor credit union, which is not a depository credit union, is neither given notice nor otherwise affected by a restrictive endorsement of any person except the credit union’s immediate transferor.

Source: S.L. 1987, ch. 118, § 1.

CHAPTER 6-06.1 Voluntary Liquidation of Credit Unions

6-06.1-01. Approval of liquidation — Notice to commissioner.

A credit union may go into voluntary liquidation on approval of a majority of its members in writing or by a vote in favor of such liquidation by a majority of the members of the credit union at a regular meeting of the members or at a special meeting called for that purpose. When authorization for liquidation is to be obtained at a meeting of members, notice in writing must be given to each member at least seven days before such meeting and the minutes of the meeting must show the number of members present and the number that voted for and against liquidation. If approval by a majority of all members is not obtained at the meeting of members, authorization for voluntary liquidation may be obtained by having a majority of members sign a statement in substantially the following form:

We the undersigned members of the Credit Union, Charter No. , hereby request the dissolution of our credit union.

Click to view

Within ten days after the decision of the board of directors to submit the question of liquidation to the members, the president shall notify the commissioner thereof in writing, setting forth in detail the reasons for the proposed action. Within ten days after the action of the members on the question of liquidation, the president shall notify the commissioner in writing as to whether a majority of the members approved the proposed liquidation.

Source: S.L. 1967, ch. 90, § 1.

6-06.1-02. Transactions during liquidation.

Immediately on decision by the board of directors of a credit union to seek approval of the members for liquidation, payments on shares, withdrawal of shares including any transfer of shares to loans and interest, making investments of any kind, and granting of loans must be suspended pending action by members on the proposal to liquidate, and on approval by a majority of the members of such proposal, payments on shares, withdrawal of shares including any transfer of shares to loans and interest, making investments of any kind, and the making of loans must be permanently discontinued. Necessary expenses of operation must, however, continue to be paid on authorization by the board of directors or liquidating agent during the period of the liquidation.

Source: S.L. 1967, ch. 90, § 2.

6-06.1-03. Notice of liquidation to members — Creditors.

Immediately on decision by the board of directors, a notice of such decision must be handed to each member or mailed to the member’s last-known address together with a request that the member furnish the member’s passbook or confirm in writing the shares held by the member in the credit union and the loans owed by the member to the credit union.

On approval of a majority of the members of a credit union of a proposal to liquidate, the board of directors of the credit union shall immediately have prepared and mailed to all creditors a notice of liquidation containing instructions to them to present their claims to the credit union within ninety days for payment.

Source: S.L 1967, ch. 90, § 3.

6-06.1-04. Report at commencement of liquidation — Reports during period of liquidation.

At the commencement of voluntary liquidation of a credit union, the treasurer or agent conducting the liquidation shall file with the commissioner a financial and statistical report and a schedule showing the name, book number, share balance, and loan balance of each member.

Credit unions in the process of voluntary liquidation shall file with the commissioner a financial and statistical report as of December thirty-first within ten days after such date. Additional reports, as determined by the commissioner to be necessary, must be furnished promptly on written request.

Source: S.L. 1967, ch. 90, § 4.

Cross-References.

Liquidation by state examiner, see § 6-06-33.

6-06.1-05. Examinations in voluntary liquidation.

When deemed advisable by the commissioner, an examination of the books and records of a credit union may be made prior to, during, or following completion of voluntary liquidation. A fee for each examination must be assessed at the rate currently in effect for examinations of operating credit unions. Fees must be collected by the commissioner, transferred to the state treasurer, and deposited in the financial institutions regulatory fund.

Source: S.L. 1967, ch. 90, § 5; 1991, ch. 85, § 5.

6-06.1-06. Responsibility for conduct of voluntary liquidation.

The board of directors of a credit union in voluntary liquidation is responsible for conserving the assets, for expediting the liquidation, and for equitably distributing the assets to members. The board of directors shall determine that all persons handling or having access to funds of the credit union are adequately covered by surety bond. The board of directors shall appoint a custodian for the credit union’s records that are to be retained for five years after the charter is canceled. The board of directors may appoint a liquidating agent and delegate part or all of these responsibilities to the agent and may authorize reasonable compensation for the agent’s services. Any such liquidating agent must be bonded for faithful performance of the agent’s duties. The supervisory committee is responsible for making periodic audits of the credit union’s records, at least quarterly, during the period of liquidation.

Source: S.L. 1967, ch. 90, § 6.

6-06.1-07. Partial distribution.

With the written approval of the commissioner, a partial distribution of the credit union’s assets may be made to its members from cash funds available on authorization by its board of directors or by a duly authorized liquidating agent whose appointment specifically includes such authority.

Source: S.L. 1967, ch. 90, § 7.

6-06.1-08. Completion of liquidation.

When all assets of the credit union have been converted to cash or found to be worthless and all loans and debts owing to it have been collected or found to be uncollectible and all obligations of the credit union have been paid, with the exception of amounts due its members, the books must be closed and the pro rata distribution to members computed. The amount of gain or loss must be entered in each member’s share account and should be entered in the member’s passbook or statement of account.

Source: S.L. 1967, ch. 90, § 8.

6-06.1-09. Distribution of assets.

Promptly after the pro rata distribution to members has been computed, checks must be drawn for the amounts to be distributed to each member who has surrendered the member’s passbook or has given a written confirmation of the member’s balance. The checks must be mailed to such members at their last-known addresses or handed to them in person. The passbooks or written confirmations submitted by members to verify balances must be retained with the credit union records. The commissioner must be notified promptly of the date final distribution of assets to the members is started. Unclaimed share accounts which have been dormant for the period which makes them subject to the escheat or abandoned property laws of the state of North Dakota must be paid to the state as required by such laws.

Source: S.L. 1967, ch. 90, § 9.

6-06.1-10. Final report.

Within one hundred twenty days after the final distribution to members is started, the credit union shall furnish to the commissioner’s office the following:

  1. A schedule on an official form of unpaid claims, if any, due members who failed to surrender their passbooks or confirm their balances in writing during liquidation whose accounts are not payable to the state under applicable escheat or abandoned property laws, and of unpaid claims, if any, due members or creditors who failed to cash final distribution checks within the said one hundred twenty days; this schedule must be accompanied by a certified check or money order payable to the state treasurer in the exact amount of the total of these unpaid claims. The state treasurer will deposit said funds in a special account where they will be held for the account of the individuals named on said schedule. Each such individual or any authorized person on the individual’s behalf may submit to the state treasurer a written claim for the amount of such funds held for the individual.
  2. A schedule on an official form showing the name, book number, share balance at the commencement of liquidation, pro rata share of gain or loss, and the amount of each unclaimed share account paid to the state under applicable escheat or abandoned property laws. The check number and date of payment to the state should be included in the schedule.
  3. A schedule on an official form showing the name, book number, share balance at the commencement of liquidation, pro rata share of gain or loss, and the amount distributed to each member.
  4. A summary report on liquidation in duplicate on an official form.
  5. The certificate of dissolution and liquidation on an official form signed under oath by the board of directors or agent who conducted the liquidation and made the final distribution of assets to the members.
  6. The name and address of the custodian of the credit union’s records.
  7. The charter of the credit union.

Source: S.L. 1967, ch. 90, § 10.

6-06.1-11. Retention of records — Cancellation of charter.

All records of the liquidated credit union necessary to establish that creditors were paid and that members’ shareholdings were equitably distributed must be retained by a custodian appointed by the board of directors of said credit union for a period of five years following the date of cancellation of the charter.

On proof that distribution of assets has been made to members and within one year after receipt of the certificate of dissolution and liquidation, the commissioner shall cancel the charter of the credit union concerned.

Source: S.L. 1967, ch. 90, § 11.

6-06.1-12. Further instructions and information.

Further detailed instructions, information, and official forms pertaining to voluntary liquidations may be obtained from the commissioner’s office, Bismarck, North Dakota, 58505.

Source: S.L. 1967, ch. 90, § 12.

CHAPTER 6-07 Dissolution, Insolvency, Suspension, and Liquidation [Repealed]

Source: Repealed by S.L. 2021, ch. 77, § 10, effective August 1, 2021.

CHAPTER 6-07.1 Dissolution and Liquidation of Trust Companies

6-07.1-01. Action to close state trust company.

The commissioner or board may close and liquidate a state trust company on finding that the interests of its clients and creditors are jeopardized by the state trust company’s insolvency or imminent insolvency or that the best interests of clients and creditors would be served by requiring that the state trust company be closed and its assets liquidated. A majority of the state trust company’s directors, managers, or managing participants may voluntarily close the state trust company and place it with the commissioner for liquidation.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-02. Involuntary closing.

After closing a state trust company, the commissioner shall place a sign at its main entrance stating that the state trust company has been closed. A correspondent bank of the closed state trust company may not pay an item drawn on the account of the closed state trust company which is presented for payment after the correspondent has received actual notice of closing unless it previously certified the item for payment. As soon as practicable after posting the sign at the state trust company’s main entrance, the commissioner shall file a copy of the notice of the action to close a state trust company in district court in the county where the state trust company’s home office is located. The court in which the notice is filed shall docket it as a case styled, “In re liquidation of _________ ”, inserting the name of the state trust company. As soon as this notice is filed, the court has constructive custody of all the state trust company’s assets, and any action initiated which seeks to directly or indirectly affect state trust company assets is considered to be an intervention in the receivership proceeding. Venue for an action instituted to effect, contest, or otherwise intervene in the liquidation of a state trust company is Burleigh County, North Dakota, except on a motion filed and served concurrently with or before the filing of the answer, the court, on a finding of good cause, may transfer the action to the county of the state trust company’s home office.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-03. Nature and duration of receivership.

The court may not require a bond from the commissioner as receiver. Any reference in this chapter to the receiver is a reference to the commissioner as receiver and any successors in office or an independent receiver appointed at the request of the commissioner. The acts of the receiver are the acts of the state trust company in liquidation and this state and its political subdivisions are not liable and may not be held accountable for any debt or obligation of a state trust company in receivership. The receiver has all the powers of the directors, managers, managing participants, officers, and shareholders or participants of the state trust company as necessary to support an action taken on behalf of the state trust company. A state trust company receivership must be administered continuously for the length of time necessary to complete its purposes, and the period prescribed by other law limiting the time for the administration of receiverships or of corporate affairs generally does not apply.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-04. Contest of liquidation.

A state trust company, acting through a majority of its directors, managers, or managing participants, may intervene in the action filed by the commissioner to challenge the commissioner’s closing of the state trust company and to enjoin the commissioner or other receiver from liquidating its assets. The intervenors must file the intervention not later than the second business day after the closing of the state trust company, excluding legal holidays. The court may issue an ex parte order restraining the receiver from liquidating state trust company assets pending a hearing on the injunction. The receiver shall comply with the restraining order but may petition the court for permission to liquidate an asset as necessary to prevent its loss or diminution pending the outcome of the injunction. The court shall hear this action as quickly as possible and shall give it priority over other business. The state trust company or receiver may appeal the court’s judgment as in other civil cases, except that the receiver shall retain all state trust company assets pending a final appellate court order even if the commissioner does not prevail in the district court. If the commissioner prevails in the district court, liquidation of the state trust company may proceed unless the district court or appellate court orders otherwise. If liquidation is enjoined or stayed pending appeal, the district court retains jurisdiction to permit liquidation of an asset as necessary to prevent its loss or diminution pending the outcome of the appeal.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-05. Notice of state trust company closing.

As soon as reasonably practicable after initiation of the receivership proceeding, the receiver shall publish notice, in a newspaper of general circulation in each community where the state trust company’s home office and a branch are located. The notice must state that the state trust company has been closed for liquidation, that creditors and clients must present their claims for payment on or before a specific date, and that all safe deposit boxholders and bailors of property left with the state trust company should remove their property not later than a specified date. The receiver shall select the dates to allow the affairs of the state trust company to be wound up as quickly as feasible while allowing creditors, clients, and owners of property adequate time for presentation of claims, withdrawal of accounts, and redemption of property, but may not select a date before one hundred twenty days after the date of the notice. The receiver may adjust the dates with the approval of the court with or without republication if additional time appears needed for these activities. As soon as reasonably practicable given the state trust company records and the adequacy of staffing, the receiver shall mail to each of the state trust company’s known clients, creditors, safe deposit boxholders, and bailors of property left for the state trust company, at the mailing address shown on the state trust company records, an individual notice containing the information required in this section. The receiver may determine the form and content notices under this section.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-06. Inventory.

As soon as reasonably practicable given the condition of the state trust company records and the adequacy of staffing, the receiver shall prepare a comprehensive inventory of the state trust company’s assets for filing with the court. The inventory must be open to inspection.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-07. Title and receiver.

The receiver has title to all the state trust company’s property, contracts, and rights of action, wherever located, beginning on the date the state trust company is closed for liquidation. The rights of the receiver have priority over all liens that arise after the date of the closing of the state trust company for liquidation.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-08. Rights fixed.

The rights and liabilities of state trust company liquidation and of a client, creditor, officer, director, manager, managing participant, employee, shareholder, participant, agent, or other person interested in the state trust company’s estate are fixed on the date of closing of the state trust company for liquidation, except as otherwise directed by the court or as expressly provided by this chapter.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-09. Depositories.

The receiver may deposit funds collected on behalf of the state trust company estate in the Bank of North Dakota or one or more depository institutions in this state. If receivership funds deposited in an account at a depository institution exceed the maximum insured amount, the receiver shall require the excess deposit to be adequately secured through pledge of securities or otherwise, without approval of the court.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-10. Pending lawsuits.

A judgment or order of a court of this state or of any other jurisdiction in an action pending by or against the state trust company, rendered after the date the state trust company was closed for liquidation, is not binding on the receiver unless the receiver was made a party to the suit. Before the first anniversary of the date the state trust company was closed for liquidation, the receiver may not be required to plead to any suit pending against the state trust company in a court in this state on the date the state trust company was closed for liquidation and in which the receiver is a proper plaintiff or defendant.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-11. New lawsuits.

Except as otherwise provided in this section, the court in which the receivership proceeding is pending under this chapter has exclusive jurisdiction to hear and determine all actions or proceedings instituted by or against the state trust company or receiver after the receivership proceeding starts. The receiver may file in any jurisdiction an ancillary suit that may be helpful to obtain jurisdiction or venue over a person or property. Exclusive venue of an action or proceeding instituted against the receiver or the receiver’s designated agent, including an employee of the department, which asserts personal liability on the part of the receiver or designated agent lies in Burleigh County, North Dakota.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-12. Records with third parties.

Each state trust company affiliate, officer, director, manager, managing participant, employee, shareholder, participant, trustee, agent, employee, attorney, attorney in fact, or correspondent shall immediately upon request deliver to the receiver any property, book, record, account, document, or other writing of the state trust company which relates to the business of the state trust company, without cost to the receiver.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-13. Injunction in aid of liquidation.

On application by the receiver, the court may with or without notice issue an injunction restraining each state trust company, officer, director, manager, managing participant, employee, shareholder, participant, trustee, agent, employee, attorney, attorney in fact, accountant or accounting firm, correspondent, or another person from transacting the state trust company’s business or wasting or disposing of its property or requiring the delivery of its property or assets to the receiver subject to the further order of the court. The court, at any time during a proceeding under this chapter, may issue another injunction or order considered necessary or desirable to prevent interference with the receiver of the proceeding, waste of the assets of the state trust company, the beginning of prosecution of an action, the obtaining of a preference, judgment, attachment, garnishment, or other lien, or the making of a levy against the state trust company or its assets.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-14. Subpoena.

In addition to the authority granted by law to the receiver relating to the taking of a deposition of a witness in a civil action, the receiver may request the court ex parte to issue a subpoena to compel the attendance and testimony of a witness before the receiver and the production of a book, account, record, paper, or correspondence, or other record relating to the receivership estate. For this purpose, the receiver or the receiver’s designated representative may administer an oath or affirmation, examine a witness, or receive evidence. The court has statewide subpoena power and may compel attendance and production of a record before the receiver at the state trust company, the office of the receiver, or another location. In case of disobedience of a subpoena, or of the contumacy of a witness appearing before the receiver or the receiver’s designated representative, the receiver may request and the court may issue an order requiring the person subpoenaed to obey the subpoena, give evidence, or produce any record relating to the matter in question.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-15. Preferences.

Any transfer of or lien on the property or assets of a state trust company is voidable by the receiver if the transfer or lien is made or created after four months before the date the state trust company is closed for liquidation or one year before the date the state trust company is closed for liquidation if the receiving creditor was at the time an affiliate, officer, director, manager, principal shareholder, or participant of the state trust company or an affiliate of the state trust company, or was made or created with the intent of giving to a creditor, enabling the creditor to obtain a greater percentage of the claimant’s debt that is given or obtained by another claimant of the same class.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-16. Administrative expenses.

The receiver may employ agents, legal counsel, accountants, appraisers, consultants, and other personnel the receiver considers necessary to assist in the performance of the receiver’s duties. The receiver may use personnel of the department if the receiver considers the use to be advantageous or desirable. The expense of employing these persons is an administrative expense of liquidation.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-17. Disposal of property and settling claims.

In the course of liquidating a state trust company, the receiver on order of the court entered with or without hearing may sell all or part of the real and personal property of the state trust company; borrow money and pledge all or part of the assets of the state trust company to secure the debt created, except that the receiver may not be held personally liable to repay borrowed funds; compromise or compound a doubtful or uncollectible debt or claim owed by or owing to the state trust company; and enter another agreement on behalf of the state trust company that the receiver considers necessary or proper to the management, conservation, or liquidation of its assets.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-18. Filing reports and expenses.

The receiver shall file quarterly reports with the court showing the operation, receipts, expenditures, and general condition of the state trust company in liquidation. The receiver shall also file a final report regarding the liquidated state trust company showing all receipts and expenditures and giving a full explanation and a statement of the disposition of all assets of the state trust company. The receiver shall pay all administrative expenses out of funds or assets of the state trust company. Each quarter the receiver shall submit an itemized report of those expenses.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-19. Fiduciary activities.

As soon after beginning the receivership proceeding as is practicable, the receiver shall terminate all fiduciary positions it holds, surrender all property held by it as a fiduciary, and settle the state trust company’s fiduciary accounts. The receiver shall release all segregated and identifiable fiduciary property held by the state trust company to successor fiduciaries. With the approval of the court, the receiver may sell the administration of all or substantially all remaining fiduciary accounts to one or more successor fiduciaries on terms that appear to be in the best interests of the state trust company’s estate and the persons interested in the fiduciary accounts. If commingled fiduciary funds held by the state trust company as trustee are insufficient to satisfy all fiduciary claims to the commingled funds, the receiver shall distribute commingled funds pro rata to all fiduciary claimants of commingled funds based on their proportionate interests after payment of administrative expenses related solely to the fiduciary claims. The fictional tracing rule does not apply. The receiver may require certain fiduciary claimants to file proofs of claim if the records of the state trust company are insufficient to identify their respective interests.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-20. Disposition and maintenance of records.

On approval by the court, the receiver may dispose of records of the state trust company in liquidation which are obsolete and unnecessary to continue administration of the receivership proceeding. Records of a liquidated state trust company are not public records for any purpose and are exempt from public disclosure. To maintain the records of a liquidated state trust company after the closing of the receivership proceeding, the receiver may reserve assets of an estate, deposit them in an account, and use them for maintenance, storage, and disposal of records in closed receivership estates.

Source: S.L. 1999, ch. 78, § 1.

6-07.1-21. Filing claims.

A person who has a claim against the estate of a state trust company in liquidation must file proof of claim pursuant to rules adopted by the state banking board. The priority of disposition of assets from the estate of a state trust company must be in accordance with the order of each class as provided by this section. Every claim in each class must be paid in full, or adequate funds must be retained for that payment, before the members of the next class receive any payment. A subclass may not be established within a class, except for a preference or subordination within a class expressly created by contract or other instrument in the articles of association. Assets must be distributed in the following order of priority: administrative expenses; approved claims of secured trust deposits; approved claims of secured creditors; approved claims by beneficiaries insufficient to satisfy all fiduciary claims to commingled fiduciary funds or missing fiduciary property and approved claims of clients of the state trust company; other approved claims of general creditors not falling within a higher priority under this section; approved claims of a type described above that were not filed within the period prescribed; and claims of capital note or debenture holders or holders of similar obligations and proprietary claims of shareholders, participants, or other owners accorded the terms established by issue, class, or series. After completion of the liquidation, any unclaimed property remaining in the hands of the receiver must be considered abandoned property.

Source: S.L. 1999, ch. 78, § 1.

CHAPTER 6-07.2 Dissolution, Insolvency, Suspension, Receivership, and Liquidation

Source: S.L. 2021, sb2102, § 9, effective August 1, 2021.

6-07.2-01. Department taking possession — Procedure.

  1. The commissioner may take possession of the business and property of an institution the commissioner supervises if it appears to the commissioner that any of the following conditions exist:
    1. The directors or officers of the institution, or the liquidators of the institution subject to a voluntary plan of liquidation, have neglected, failed, or refused to take action the commissioner deems necessary for the protection of the institution.
    2. The directors, officers, or liquidators of the institution have impeded or obstructed an examination. This may include concealment or refusal to submit books, papers, records, or affairs of the institution for inspection to any examiner or to any lawful agent of the appropriate federal financial institution regulatory agency or of the department.
    3. The business is being conducted in a fraudulent, illegal, or unsafe manner.
    4. The institution is conducting business in a way causing losses to depositors.
    5. The institution is operating in an unsafe or unsound condition.
    6. The capital of the institution is impaired such that the likely realizable value of the institution’s assets is insufficient to pay and satisfy the claims of all depositors and all creditors.
    7. The institution is insolvent or in imminent danger of insolvency or has suspended ordinary business transactions of the institution due to insufficient funds.
    8. The institution has refused or been unable to pay deposits or obligations in accordance with the terms under which those deposits or obligations of the institution were incurred.
    9. Substantial dissipation of assets or earnings due to:
      1. Any violation of any law or rule; or
      2. An unsafe or unsound practice.
    10. The institution is unable to continue operations.
    11. The institution is in violation of any applicable state or federal regulation.
    12. Neglect or refusal to comply with the terms of a final order of the department, state banking board, state credit union board, or federal financial institution’s regulatory agency essential to preserve the solvency of the institution.
    13. The institution has failed to pay the fees charged by the department under section 6-01-17 after due notice of the amount of the fee has been given.
    14. The institution’s board of directors requests that the department take possession for the benefit of depositors, other creditors, shareholders, or other persons.
    15. The institution has been advised by the federal deposit insurance corporation of the federal deposit insurance corporation’s intention to withdraw deposit insurance coverage.
    16. The institution has been advised by the national credit union association of the national credit union association’s intention to withdraw share insurance coverage.
    17. The directors or officers of the bank, or the liquidators of a bank subject to a voluntary plan of liquidation, have assumed duties or performed acts in excess of those authorized by applicable statutes or regulations, by the bank’s organizational documents or plan of liquidation, or without supplying the required bond.
  2. If it appears to the commissioner one or more of the conditions in this section exists as to any institution, the commissioner shall cause a notice to be served on the president or other executive officer in charge of the institution and, pursuant to such notice, take possession of the business, property, and records of the institution from the officer citing the reasons for such a demand from this section. The decision of the commissioner is final upon the president or other executive officer’s receipt of the notice and the institution immediately shall surrender possession to the commissioner.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-02. When possession terminates.

If the commissioner has taken possession of the business and property of an institution under the provisions of section 6-07.2-01, the commissioner shall hold possession of the business and property until the affairs of the institution have been finally liquidated as provided in this chapter, unless the institution has undertaken the voluntary liquidation of the affairs of the institution under this chapter, or either the federal deposit insurance corporation, or any successor federal deposit insurance agency, or the national credit union association, or any successor federal deposit insurance agency, has been appointed receiver.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-03. Notice of possession.

  1. Immediately upon taking possession of the business and property of an institution under section 6-07.2-01, the commissioner shall give notice by:
    1. Causing the notice to be served upon the president or other executive officer in charge of the business of the institution;
    2. Causing the notice to be provided to all correspondent banks of the institution. However, if the commissioner fails to provide the notice, the commissioner shall incur no liability for such failure to act; and
    3. Causing the notice to be made public.
  2. The rights and liabilities of an institution and of the institution’s creditors, depositors, shareholders, and all other persons interested in the institution’s estate, unless otherwise directed, must be fixed as of the date of the delivery of the notice of possession to the president or other executive officer actively in charge of the business of the institution. In the case of mutual debts or mutual credits of equal priority between the institution and another person, the credits and debts must be setoff and the balance only must be allowed or paid. The right to setoff must be determined as of the date of delivery of the notice of possession of the institution to the president or other executive officer actively in charge of the business of the institution.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-04. Appointment of receiver — Restrictions on proceedings, liens, or credits — Bonding.

  1. After taking possession of the business and property of the institution, the commissioner may appoint the appropriate federal deposit insurance agency or other qualified party as the receiver of the closed institution. If the federal deposit insurance corporation or national credit union association accepts appointment as receiver, the federal deposit insurance corporation or national credit union association is not required to post bond.
  2. Upon appointment as receiver, title to all assets of the institution vests in the receiver without the execution of any instruments of conveyance, assignment, transfer, or endorsement. If no other receiver is appointed as provided in this chapter, the commissioner shall act as receiver and has all of the powers and duties of a receiver as provided in this chapter.
  3. Except as otherwise provided, the sole and exclusive right to liquidate and terminate the affairs of an institution is vested in the receiver appointed under this section, and another receiver, assignee, trustee, or liquidating agent may not be appointed by any court or any other person.
  4. After the commissioner has taken possession of the business and property of an institution, a suit, action, or other proceeding at law or in equity may not be commenced or prosecuted against the institution upon any debt, obligation, claim, or demand. All such claims may be brought against the receiver.
  5. A person holding any of the property or credits of the institution does not have a lien or charge against the property or credits for any payment, advance, or clearance made after the commissioner has taken possession. A lien may not attach to any of the assets or property of the institution by reason of the entry of any judgment recovered against the institution after the commissioner has taken possession of the institution’s business and property.
  6. Every receiver appointed by the commissioner, except a federal deposit insurance agency, before entering upon the discharge of the receiver’s duties and before proceeding to liquidate the affairs of any institution, may be required by the commissioner to furnish a bond. Such bond must be approved as to form and amount by the commissioner. The cost of such bond must be paid from the assets of the institution being liquidated.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-05. Powers of receiver.

The receiver of a closed institution may do the following:

  1. Take possession of all books, records, and assets of the institution.
  2. Collect all debts, claims, and judgments belonging to the institution and do such other acts as are necessary to preserve and liquidate the assets of the institution.
  3. Execute in the name of the institution any instrument necessary or proper to effectuate the receiver’s powers or perform the duties as receiver.
  4. Initiate, pursue, and defend litigation involving any right, claim, interest, or liability of the institution.
  5. Exercise any and all existing fiduciary functions of the institution as of the date of appointment as receiver.
  6. Borrow money as necessary and secure the borrowings by the pledge or mortgage of assets. The repayment of money borrowed under this subsection and interest on the money borrowed under this section must be considered an expense of administration under section 6-07.2-09.
  7. Abandon or convey title to any holder of a mortgage, deed of trust, security interest, or lien against property in which the institution has an interest if the receiver determines that to continue to claim the interest is burdensome and of no advantage to the institution or the institution’s depositors, creditors, or shareholders.
  8. Repudiate any leases or executory contracts to which the institution is a party in accordance with section 6-07.2-09.
  9. Sell any and all real and personal property to compromise any debt, claim, or judgment due from the institution and discontinue any action or other proceedings pending.
  10. Pay off all mortgages, deeds of trust, security agreements, and liens upon any real or personal property belonging to the institution and purchase at judicial sale or at sale authorized by court order, any real or personal property in order to protect the institution’s equity in that property.
  11. Sell in bulk the assets and liabilities of the institution.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-06. Sale of assets — Assumptions of deposit liabilities by new institution.

The receiver may sell all or any part of the institution’s assets to one or more other state or federally chartered depository institution or to a federal deposit insurance agency in the receiver’s corporate capacity. The receiver may also borrow from a federal deposit insurance agency an amount necessary to facilitate the assumption of deposit liabilities by a newly chartered or existing state or federally chartered depository institution, assigning any part or all of the assets of the institution as security for the loan.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-07. Presentation of claims — Notice of claims procedure — Rejection of claims — Statute of limitations.

  1. All parties having claims against the closed institution shall present the claims of the parties supported by proof to the receiver within one hundred eighty days after the commissioner has taken possession. This period may be extended by written agreement between the claimant and the receiver. The receiver shall cause notice of the claims procedures prescribed by this section to be made public and mailed to each person whose name appears as a creditor upon books of the institution at the person’s last address of record. Within one hundred eighty days following receipt of the claim, the receiver shall notify in writing any claimant whose claim has been rejected. Notice is effective when mailed. A claimant whose claim has been rejected by the receiver may petition a court for a hearing on the claim within sixty days from the date the claim was rejected. The claim of a party against the closed institution must be disallowed, other than any portion of the claim which was allowed by the receiver, as of the end of the sixty-day period if the party having the claim fails to:
    1. Request an administrative review of any claim by the receiver in accordance with proper procedure; or
    2. File suit on the claim, or continue an action commenced before the appointment of the receiver, before the end of the sixty-day period.
  2. The disallowance is final, and the claimant has no further rights or remedies with respect to the claim.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-08. Claims filed after one hundred eighty-day claim period.

A claim filed after the one hundred eighty-day claim period prescribed by section 6-07.2-07 and subsequently accepted by the receiver is entitled to share in the distribution of assets only to the extent of the undistributed assets in the hands of the receiver on the date the claim is accepted or allowed.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-09. Payment of claims.

  1. All claims against the institution’s estate, proved to the receiver’s satisfaction or approved by the circuit court, must be paid in the following order:
    1. Administration expenses, including compensation of each regular officer or employee of the receiver for the time actually devoted to the liquidation of the institution at an amount not to exceed the compensation paid to the officer or employee for the performance of the officer’s or employee’s regular duties; actual expenses of each regular officer and employee necessarily incurred in the performance of the officer’s or employee’s duties; compensation and expenses of any special representative, assistant, accountant, agent, or attorney employed by the receiver; court costs; and if the commissioner is acting as receiver, such reasonable general overhead expenses as may be incurred by the commissioner in the liquidation of the affairs of the institution which shall be ascertained, determined, and fixed by the commissioner.
    2. Claims given priority under other provisions of state or federal law.
    3. Deposit obligations, except that notwithstanding sections 6-03-67 and 41-04-31, if a depositor is indebted to an insolvent bank, the insolvent bank has a right to setoff against the depositor’s account.
    4. Other general liabilities.
    5. Debt subordinated to the claims of depositors and general creditors.
    6. Equity capital securities.
  2. Interest on a claim may not be paid until all claims within the same class have received the full principal amount of claim.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-10. Rejection of contracts and leases.

  1. Within one hundred eighty days after the date the commissioner has taken possession, the receiver may reject:
    1. An executory contract to which the closed institution is a party without any further liability to the closed institution or the receiver; and
    2. An obligation of the institution as a lessee of real or personal property.
  2. The receiver’s election to reject a lease does not create a claim for rent other than rent accrued to the date of termination.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-11. Subrogation of federal deposit insurance agency to right of depositors.

If a federal deposit insurance agency pays or makes available for payment the insured deposit liabilities of a closed institution, the federal deposit insurance agency, whether or not the federal deposit insurance agency acts as receiver, must be subrogated by operation of law to all rights of depositors against the closed institution relating to claims for deposits so paid by the federal deposit insurance agency to the extent necessary to enable the federal deposit insurance agency, under federal law, to make insurance payments available to depositors of closed institutions.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-12. Appointment of successor fiduciary and representative proceedings.

  1. The receiver may appoint one or more successors to any or all of the rights, obligations, assets, deposits, agreements, and trusts held by the closed institution as trustee, administrator, executor, guardian, agent, and all other fiduciary or representative capacities. The approval may be obtained in connection with the proceedings authorized under section 6-07.2-06.
  2. A successor’s duties and obligations begin upon appointment to the same extent binding upon the closed institution and as though the successor had originally assumed the duties and obligations. Specifically, a successor must be appointed to administer trusteeships, administrations, executorships, guardianships, agencies, and other fiduciary or representative proceedings to which the closed institution is named or appointed in wills, whenever probated, or to which it is appointed by any other instrument or court order, or by operation of law.
  3. This section does not impair any right of the grantor or beneficiaries of trust assets to secure the appointment of a substituted trustee or manager.
  4. Within thirty days after appointment, a successor shall give written notice, insofar as practical, that the successor has been appointed in accordance with applicable law to all interested parties named in:
    1. The books and records of the closed institution; and
    2. Trust documents held by the successor.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-13. Notice concerning safekeeping and safe deposit boxes.

The receiver shall cause notice to be mailed to the last address of record to the owners of any personal property in the possession of or held by a closed institution for safekeeping, and to all lessees of safe deposit boxes. The notice must require the intended recipients to appear and assert the claims of the recipients to the property within sixty days from the date of the notice. The receiver shall make such agreements or arrangements as may be necessary for the disposition of property held by the closed institution for safekeeping and the contents of safe deposit boxes, and for the termination of any leases or other contracts relating to the property or contents.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-14. Actions for enforcement or rights, demands, or claims vested in an institution or its shareholders of creditors.

Notwithstanding any other provision of state law, the receiver may, within five years from the date of closing of the institution, institute and maintain, in the name of the receiver, any action or proceeding for the enforcement of any right, demand, or claim that is vested in the institution.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-15. Contents of articles of dissolution.

If the proceedings described in this chapter have been completed, the receiver shall execute and file, in the manner provided in this section, articles of dissolution, setting forth the following information:

  1. The name of the institution;
  2. The place where the institution’s main office was located;
  3. The names and addresses of the directors and officers of the institution at the time the liquidation proceedings were begun;
  4. A brief summary of the aggregate amount of general claims finally allowed against the institution, the order in which the claims were paid, and the aggregate amount of all other claims against the institution. A statement of the aggregate payments made on each of the groups of claims must be provided, referencing the orders of the receiver authorizing those payments and the current reports documenting such payments; and
  5. A brief summary of the aggregate amount of payments made to the shareholders of the institution, whether of money or other property, and a reference to the orders of the receiver authorizing the payments and to the current reports in which documentation of the payments is made.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-16. Execution and filing of articles with department — Certificate of dissolution.

  1. The articles of dissolution must be executed in duplicate and presented in duplicate to the department of financial institutions.
    1. Upon presentation of the articles of dissolution, the commissioner shall endorse the commissioner’s approval upon each of the duplicate copies of the articles if the commissioner finds the articles conform to law.
    2. The commissioner shall file one copy of the articles in the department and issue two certificates of dissolution. The commissioner shall file one certificate of dissolution with the department and shall deliver the second to the receiver.
  2. Upon the issuance of the certificate of dissolution, the institution is dissolved and its existence ceases. Upon the issuance of the certificate of dissolution, the receiver is authorized, as agent for the directors and shareholders of any subsidiary trust company, to file any and all documents with the secretary of state necessary to terminate the subsidiary trust company’s corporate existence under applicable corporate law.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-17. Emergency temporary suspension or conservatorship.

  1. If upon the examination or investigation of an institution regulated by the commissioner, the commissioner determines the laws are not being fully observed, that any irregularities are being practiced, or that the institution’s capital has been or is in danger of being impaired, the commissioner shall give immediate notice of such determination to the officers and directors of the institutions. In addition, if it is deemed necessary in order to conserve the assets of the institution or to protect the interests of depositors and creditors of the institution, the commissioner may do any one or more of the following:
    1. Temporarily suspend the right of the institution to receive any further deposits;
    2. Temporarily close the bank, for a period not exceeding sixty days, which period may be further extended for one or more sixty-day periods as the commissioner may deem necessary;
    3. Require the officers and directors of the bank to liquidate its outstanding loans insofar as required;
    4. Recapitalize the institution;
    5. Require that any irregularities be corrected promptly;
    6. Require the institution to make reports, daily or at such other times as may be required to the commissioner; and
    7. Without examination, close or appoint a receiver to operate, for such period as the commissioner may deem necessary, an institution facing an emergency due to withdrawal of deposits, a liquidity event in which the institution is unable to continue operations, a cyber- or technology-related incident, or otherwise, or, without closing the institution, grant the institution the right to suspend or limit the withdrawal of deposits, for such period as the commissioner may determine.
  2. If an institution fails or refuses to comply with any such order of the commissioner, or if the commissioner determines a receiver for the institution should be appointed, the commissioner may apply for the appointment of a receiver to take charge of the business affairs and assets of the institution and to wind up the institution’s affairs as provided in this chapter.
  3. A bank or credit union may request a hearing before the state banking board or state credit union board within ten days of the emergency temporary suspension or conservatorship to review the factual basis used to issue the emergency temporary suspension or conservatorship. The decision made by the state banking board or state credit union board during the hearing is final. If a hearing is not requested, the initial decision of the commissioner is final.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

6-07.2-18. Voluntary liquidation of a bank.

  1. An application for approval to voluntarily liquidate the affairs of a bank must be submitted to the commissioner in the manner and form that the commissioner may prescribe, must include the information set forth in this section, and must contain such additional information the commissioner may require. The application must include duplicate copies of a resolution authorizing the dissolution and duplicate copies of a certificate, verified by the applicant’s president or chief executive officer or a vice president, stating the facts pertaining to the resolution and that the applicant’s liabilities have been paid in full. Each duplicate certificate must have annexed to the duplicate, over the official signatures, evidence showing:
    1. The date on which the resolution was authorized by the affirmative vote of the holders of at least a simple majority of the outstanding shares entitled to vote on the resolution;
    2. The number of shares of each class entitled to vote on the resolution which were outstanding on the date of the stockholders’ meeting;
    3. The number of shares of each class entitled to vote on the resolution whose owners were present in person or by proxy;
    4. The number of shares of each class voted for and against the resolution; and
    5. The manner in which the meeting was called and the time and manner of giving notice, with a certification that the meeting was lawfully called and held.
  2. Upon receipt of the application, the commissioner shall investigate the merits of the application. If the commissioner is satisfied the application is complete and all applicable provisions of law have been complied with, the commissioner shall cause an examination to be made of the applicant institution for the purpose of verifying the payment of all the applicant’s liabilities. If the examination satisfies the commissioner that all of the applicant’s liabilities have been paid, the commissioner shall endorse one copy of the certificate with the commissioner’s statement that the institution is voluntarily liquidating. The return of the endorsed copy of the certificate operates to free the institution from further examination and to authorize the institution, under the original corporate name of the institution, to sue and be sued, to execute conveyances and other instruments, to take, hold, and own property, and to do all such other things as may be necessary to realize upon the institution’s remaining assets for the pro rata benefit of the institution’s stockholders, but not to engage or continue in any new or other business under the institution’s charter or otherwise. The liquidation must proceed as expeditiously as possible, and upon conclusion, the institution shall surrender its charter. In lieu of continuing the liquidation under the original corporate name, the institution may transfer the remaining assets to a trustee agreed upon by the stockholders by a majority vote and upon so doing shall surrender the institution’s charter.

Source: S.L. 2021, ch. 77, § 9, effective August 1, 2021.

CHAPTER 6-08 General Provisions

6-08-01. Banks to have official number.

Each bank organized under the laws of this state must be numbered and shall receive from the secretary of state an official number, and the secretary of state shall notify each bank of its official number and also shall file a list of banks and their numbers with the commissioner.

Source: S.L. 1909, ch. 43; C.L. 1913, § 5157; S.L. 1931, ch. 96, § 56; R.C. 1943, § 6-0801.

6-08-02. Oath of officers — Form and filing.

Every active officer of any state banking association or trust company organized under this title, before entering upon the duties of the office, shall take and subscribe an oath that the officer will administer the affairs of the association or trust company diligently and honestly, so far as the duty devolves upon the officer, and that the officer will not violate knowingly, nor willingly permit to be violated, any of the provisions of this title. All oaths must be presented to the board of directors and a synopsis thereof recorded in the board’s record and then filed with the board.

Source: S.L. 1893, ch. 27, § 30; R.C. 1895, § 3255; S.L. 1897, ch. 31; R.C. 1899, § 3255; S.L. 1905, ch. 165, § 31; R.C. 1905, § 4665; C.L. 1913, § 5180; S.L. 1931, ch. 96, § 29, subs. a; R.C. 1943, § 6-0802; 1997, ch. 84, § 2.

6-08-03. Taxation of banks.

Domestic banks must be taxed upon the same basis only as banks organized and existing under and by virtue of the laws of the United States of America, it being the purpose, design, and intent of this section to place state banks in a position of parity and equality with national banks in matters of taxation.

Source: S.L. 1931, ch. 96, § 54; R.C. 1943, § 6-0803.

6-08-04. Bank officer or employee paying overdrafts personally liable. [Repealed]

Repealed by S.L. 1969, ch. 119, § 1.

6-08-05. Bank officer or employee overdrawing own account guilty of misdemeanor. [Repealed]

Repealed by S.L. 1975, ch. 106, § 673.

6-08-06. Banks exempt from attachment and execution.

Every banking association in this state is exempt from the legal process of attachment and execution. If any bank fails, neglects, or refuses to pay any valid final judgment or decree that may be rendered against it by any court of competent jurisdiction, not properly stayed by an appeal bond within the time prescribed by statute or an order of court after rendition thereof, the state banking board shall declare such bank insolvent or in failing circumstances and forthwith shall cause a receiver to be appointed to wind up its affairs.

Source: S.L. 1905, ch. 165, § 39; R.C. 1905, § 4673; C.L. 1913, § 5188; S.L. 1931, ch. 96, § 55; R.C. 1943, § 6-0806.

Notes to Decisions

Garnishment.

Garnishment process is available in an action against a bank to recover county funds. Sargent County v. State, 47 N.D. 561, 182 N.W. 270, 1921 N.D. LEXIS 107 (N.D. 1921).

Judgment Against Bank.

A judgment against a bank directing the payment of money does not become a lien on real property owned by the bank. Baird v. Strobeck, 54 N.D. 268, 209 N.W. 348, 1926 N.D. LEXIS 144 (N.D. 1926).

Preferences Precluded.

Preferences through the act of the creditor alone, by obtaining judgment and levy of execution, are precluded. Baird v. Strobeck, 54 N.D. 268, 209 N.W. 348, 1926 N.D. LEXIS 144 (N.D. 1926); Baird v. First Nat'l Bank, 55 N.D. 856, 215 N.W. 810, 1927 N.D. LEXIS 184 (N.D. 1927).

6-08-07. Liability of bank on forged or raised check restricted. [Repealed]

Repealed by S.L. 1965, ch. 296, § 32.

6-08-08. Bank stock held by decedents — Duty of county judge, commissioner, bank officers, and receivers. [Repealed]

Repealed by S.L. 1947, ch. 114, § 1.

6-08-08.1. Sale or purchase of associations, banking institutions, or holding companies — Notification to commissioner — Hearing.

  1. No person, acting directly or indirectly or through or in concert with one or more other persons, may purchase or otherwise acquire control of an association or banking institution unless the state banking board or commissioner has been given prior written notice by application of the proposed disposition or acquisition. The written application must include such information as the state banking board shall specify. The transaction may not be consummated before the board or commissioner has granted approval.
  2. The applicant shall publish notice of the application as required by the board by rule.
  3. The commissioner shall determine if the application is complete and notify the applicant of the determination. If the commissioner determines the application is incomplete, the commissioner shall request additional information deemed necessary to complete the application.
  4. If not approved by the commissioner, the commissioner shall submit the application to the board. The board may approve or disapprove the application if the board determines that:
    1. The character, reputation, general fitness, financial standing, and responsibility of the persons proposed as new stockholders, directors, or officers is such that the interests of the other stockholders, depositors, and creditors of the institution and the public generally will be jeopardized by the change in control and management.
    2. The qualifications of management do not include adequate experience with financial institutions or other approved related experience.
  5. Within three business days after the board’s decision to disapprove an application, the board shall notify the applicant in writing of the disapproval. The notice must provide a statement of the basis for the disapproval.
  6. Within twenty days after receipt of the notice of disapproval, the applicant may request a hearing on the disapproval. The board must conduct a hearing, if requested, under the provisions of chapter 28-32. At the conclusion of the hearing, the board shall by order approve or disapprove the application on the basis of the record at the hearing.
  7. For purposes of this section, “control” means ownership or control, directly, indirectly, or through the actions of one or more persons of the power to vote twenty-five percent or more of any class of voting securities of an association, banking institution, controlling bank holding company, or the direct or indirect power to control in any manner the election of a majority of the directors of an association or banking institution, or to direct the management or policies of an association or banking institution, whether by individuals, corporations, limited liability companies, partnerships, trusts, or other entities or organizations of any type.
  8. The following acquisitions of voting securities of a North Dakota state chartered bank, which would otherwise require submission of an application under this section, are not subject to the application requirements if the acquiring person notifies the commissioner within ninety days after the acquisition and provides any relevant information requested by the commissioner: acquisition of voting securities through inheritance; acquisition of voting securities as a bona fide gift; and acquisition of voting securities in satisfaction of a debt previously contracted in good faith. This subsection does not limit the authority of the commissioner to require a party to submit a written application to the board under subsection 1.

Source: S.L. 1979, ch. 136, § 1; 1985, ch. 126, § 1; 1987, ch. 111, § 2; 1993, ch. 54, § 106; 1993, ch. 77, § 1; 2015, ch. 80, § 7, effective July 1, 2015; 2021, ch. 76, § 15, effective April 13, 2021.

Cross-References.

Assessment of civil money penalties, see § 6-01-04.3.

Notes to Decisions

Waiver of Review Hearing.

Although the provisions of N.D.C.C. § 6-08-08.1 were applicable to the parties, the judgment contained an explicit exception to the statute’s application, waiving the beneficiary’s right to a review hearing or to make any objection to the denial of her application by the State Banking board; the beneficiary voluntarily relinquished her right to a hearing on the board’s decision, and she could not now retract or object to the waiver. Karsky v. Kirby, 2004 ND 110, 680 N.W.2d 257, 2004 N.D. LEXIS 202 (N.D. 2004).

6-08-09. Banking association officers — Punishment for violation of duty — Penalty.

Any officer of any banking association violating, or knowingly permitting to be violated, any provision of this title, violation of which has not specifically been designated as a crime, is guilty of a class B misdemeanor.

Source: S.L. 1890, ch. 23, § 23; 1893, ch. 27, § 23; R.C. 1895, § 3248; R.C. 1899, § 3248; S.L. 1905, ch. 165, § 24; R.C. 1905, § 4658; C.L. 1913, § 5173; S.L. 1931, ch. 96, § 66; R.C. 1943, § 6-0809; S.L. 1975, ch. 106, § 51.

Notes to Decisions

Purpose.

This statute was intended primarily for the protection of depositors. Smith v. Rennix, 52 N.D. 935, 52 N.D. 938, 204 N.W. 843, 1925 N.D. LEXIS 154 (N.D. 1925); Jarski v. Farmers' & Merchants' State Bank, 53 N.D. 470, 206 N.W. 773, 1925 N.D. LEXIS 102 (N.D. 1925).

6-08-10. Articles as evidence.

A certified copy of the articles of incorporation of any association or corporation organized under the provisions of this title may be used as evidence in all courts, for or against any person, association, or corporation in both civil and criminal trials.

Source: S.L. 1890, ch. 23, § 8; 1893, ch. 27, § 8; R.C. 1895, § 3233; R.C. 1899, § 3233; S.L. 1905, ch. 165, § 9; R.C. 1905, § 4643; C.L. 1913, § 5158; S.L. 1931, ch. 96, § 12; R.C. 1943, § 6-0810.

6-08-11. Punishment for violation of duty by director of moneyed corporation — Penalty.

Every director of any moneyed association or corporation who willfully does any act as such director which is expressly forbidden by law, or who willfully omits to perform any duty by law expressly imposed upon the director as such director, if the punishment for such act or omission is not prescribed otherwise by this code, is guilty of a class B misdemeanor.

Source: 1877, § 655; R.C. 1895, § 7531; R.C. 1899, § 7531; R.C. 1905, § 9290; C.L. 1913, § 10019; R.C. 1943, § 6-0811; S.L. 1975, ch. 106, § 52.

6-08-12. False statements or entries — Felony. [Repealed]

Repealed by S.L. 1975, ch. 106, § 673.

6-08-13. False statements to obtain credit — Accepting credit on false statements — Misdemeanor. [Repealed]

Repealed by S.L. 1975, ch. 106, § 673.

6-08-14. False statements concerning bank values — Penalty.

Any person who knowingly makes or publishes any book, prospectus, notice, report, statement, exhibit, or other publication containing any statement which is false and which is intended to give and does give a substantially greater or less apparent value to the shares, bonds, or property, or any part thereof, of any state banking association than said shares, bonds, property, or any part thereof possess in fact, is guilty of a class A misdemeanor.

Source: S.L. 1931, ch. 96, § 62; R.C. 1943, § 6-0814; S.L. 1975, ch. 106, § 53.

6-08-15. Slander or libel of bank or credit union — Safe deposit, annuity, surety, or trust company — Aiding or abetting — Penalty — Liability for damages.

Any person who willfully and maliciously makes, circulates, or transmits to another or to others, any false statement, rumor, or suggestion, written, printed, or by word of mouth, which directly or by inference is derogatory to the financial condition, or which affects the solvency or financial standing, of any state or national bank, of any state or federal credit union, or of any annuity, safe deposit, surety, or trust company authorized to do business in this state, or who counsels, aids, procures, or induces another to start, transmit, or circulate any such false statement or rumor, is guilty of a class A misdemeanor, and in addition thereto is liable in damages to such association, or corporation, or the receiver thereof, to be recovered in a civil action brought for that purpose.

Source: S.L. 1931, ch. 96, § 63; 1931, ch. 132, § 1; R.C. 1943, § 6-0815; S.L. 1975, ch. 106, § 54; 2005, ch. 86, § 14.

Collateral References.

Imputation of insolvency as defamatory, 49 A.L.R.3d 163.

6-08-16. Issuing check or draft without sufficient funds or credit — Notice — Time limitation — Financial liability — Penalty.

  1. A person may not, for that person, as the agent or representative of another, or as an officer or member of an organization make, draw, utter, or deliver any check, draft, or order, or authorize an electronic funds transfer, for the payment of money upon a bank, banker, or depository, if at the time of the making, drawing, uttering, electronically authorizing, or delivery, or at the time of presentation for payment, if the presentation for payment is made within fourteen days after the original delivery thereof, there are not sufficient funds in or credit with the bank, banker, or depository to meet the check, draft, electronic funds transfer, or order in full upon its authorized presentation. Violation of this subsection is:
    1. An infraction if the amount of insufficient funds or credit is not more than one hundred dollars;
    2. A class B misdemeanor if the amount of insufficient funds or credit is more than one hundred dollars but not more than five hundred dollars, or if the individual has pled guilty or been found guilty of a violation of this section within three years of issuing an insufficient funds check, draft, or order;
    3. A class A misdemeanor if the amount of insufficient funds or credit is more than five hundred dollars but not more than one thousand dollars, or if the individual has pled guilty or been found guilty of two violations of this section within three years of issuing an insufficient funds check, draft, or order; or
    4. A class C felony if the amount of insufficient funds or credit is more than one thousand dollars, or an individual has pled guilty or been found guilty of three or more violations of this section within five years of willfully issuing an insufficient funds check, draft, or order.
  2. The grade of an offense under this section may be determined by individual or aggregate totals of insufficient funds checks, drafts, electronic funds transfer authorizations, or orders.
    1. In addition to the criminal penalty, the person is liable for collection fees or costs not in excess of forty dollars which are recoverable by the holder of the check, draft, electronic funds transfer authorization, or order or by the holder’s agent or representative. If the holder of the check, draft, electronic funds transfer authorization, or order or the holder’s agent or representative uses the automated clearinghouse network to collect the collection fees or costs, that person shall comply with the network’s rules and requirements. If the state’s attorney or holder determines the person identified as the issuer of the instrument did not make, draw, utter, or deliver the instrument in violation of this section but instead is the victim of fraud, that state’s attorney or holder shall provide the holder or the holder’s agent or representative written notice of the fraud and upon receipt of the notice that holder or the holder’s agent or representative may not collect fees or costs under this subdivision.
    2. A collection agency shall reimburse the original holder of the check, draft, electronic funds transfer authorization, or order any additional charges assessed by the depository bank of the check, draft, electronic funds transfer authorization, or order if recovered by the collection agency.
    3. If the person does not pay the instrument in full and any collection fees or costs not in excess of forty dollars within ten days from receipt of the notice of dishonor provided for in subsection 4, the holder of the check, draft, electronic funds transfer authorization, or order or the holder’s agent or representative is entitled to bring a civil action to recover a civil penalty. The civil penalty is payment to the holder of the instrument or the holder’s agent or representative the lesser of two hundred dollars or three times the amount of each instrument.
    4. The court may order an individual convicted under this section to undergo an evaluation by a licensed gaming, alcohol, or drug addiction counselor.
  3. The word “credit” as used in this section means an arrangement or understanding with the bank, banker, or depository for the payment of the check, draft, electronic funds transfer authorization, or order. The making of a postdated check knowingly received as such, or of a check issued under an agreement with the payee that the check would not be presented for payment for a time specified, does not violate this section.
  4. A notice of dishonor may be mailed by the holder of the check upon dishonor or by the holder’s agent or representative upon dishonor. Proof of mailing may be made by return receipt or by an affidavit of mailing signed by the individual making the mailing. The notice must be in substantially the following form:
  5. An agent acting for the receiver of a check in violation of this section may present the check to the state’s attorney for prosecution if the holder or the holder’s agent or representative mailed a notice under subsection 4. During the first one hundred twenty days after the drawer received notice under this subsection the state’s attorney shall accept the instrument presented by the agent. The criminal complaint for the offense of issuing a check, draft, electronic funds transfer authorization, or order without sufficient funds under this section must be executed within not more than one hundred twenty days after the dishonor by the drawee of said instrument for nonsufficient funds. The failure to execute a complaint within said time bars the criminal charge under this section.

Notice of Dishonored Check Date Name of Issuer Street Address City and State You are according to law notified that a check dated , , drawn on the Bank of in the amount of has been returned unpaid with the notation the payment has been refused because of nonsufficient funds. Within ten days from the receipt of this notice, you must pay or tender to (Holder or agent or representative) sufficient moneys to pay such instrument in full and any collection fees or costs not in excess of forty dollars.

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The notice of dishonor also may contain a recital of the penal provisions of this section and the possibility of a civil action to recover any collection fees or costs or civil penalty authorized by this section.

Source: S.L. 1915, ch. 52, §§ 1, 2; 1925 Supp., §§ 9971a1, 9971a2; S.L. 1931, ch. 128, §§ 1, 2; R.C. 1943, § 6-0816; S.L. 1957, ch. 99, § 1; 1957 Supp., § 6-0816; S.L. 1961, ch. 110, § 1; 1969, ch. 120, § 1; 1975, ch. 106, § 55; 1981, ch. 120, § 1; 1983, ch. 116, § 1; 1985, ch. 127, § 1; 1989, ch. 106, § 1; 1991, ch. 89, § 1; 1997, ch. 89, § 1; 1997, ch. 90, § 1; 1999, ch. 51, § 2; 1999, ch. 79, § 1; 1999, ch. 80, § 1; 2001, ch. 94, § 1; 2001, ch. 95, § 1; 2003, ch. 112, § 1; 2005, ch. 86, § 15; 2007, ch. 85, § 1; 2011, ch. 106, § 1; 2011, ch. 77, § 1; 2013, ch. 79, § 1; 2013, ch. 104, § 1.

Notes to Decisions

Arrest on Oral Charge.

The arrest on an oral charge of an owner of a place of business which had accepted a check drawn on a bank in which the defendant had no account, was proper since such arrest was made on a charge, based upon reasonable cause, of the commission of a felony by the defendant. State v. Willms, 117 N.W.2d 84, 1962 N.D. LEXIS 89 (N.D. 1962).

Burden of Proving Unconstitutionality.

District court erred in dismissing its criminal complaint against defendant for issuing a check without sufficient funds and in deciding that the subject statute was unconstitutional because mens rea was not a required element of a prescribed crime, the notice requirement minimized, if not eliminated, the danger a person may be prosecuted for innocent conduct, and ensures a person charged with violating the statute acted at least recklessly. State v. Gedrose, 2021 ND 111, 961 N.W.2d 288, 2021 N.D. LEXIS 114 (N.D. 2021).

Burden of Proving Unconstitutionality.

Defendant who contended that this section was being selectively enforced in Cass County against only those individuals financially unable to satisfy NSF checks they had issued, i.e., indigents, failed to meet the heavy burden of proof necessary to demonstrate the constitutionally impermissible enforcement of a statute where he offered no evidence that this section was being enforced against only those NSF check writers who were unable to pay, because of indigency, as opposed to those who were simply unwilling to pay or unable to pay for reasons other than indigency. State v. Wilt, 371 N.W.2d 159, 1985 N.D. LEXIS 362 (N.D. 1985).

Criminal Complaint.

Where signing and filing of criminal complaint was done well within 90 days after dishonor of the check, the criminal complaint was timely executed. State v. Latendresse, 459 N.W.2d 234, 1990 N.D. LEXIS 151 (N.D. 1990).

Electronic Collection of Fees for Collection of Insufficient Fund Checks.

Plain language of N.D.C.C. § 6-08-16 cannot be read to prohibit a holder of an insufficient fund check from electronically debiting collection fees without a written authorization from the check writer; therefore, the North Dakota Department of Financial Institutions improperly entered a cease and desist order to a collection agency regarding its electronic collection of fees for checks returned for insufficient funds. CybrCollect, Inc. v. N.D. Dep't of Fin. Insts., 2005 ND 146, 703 N.W.2d 285, 2005 N.D. LEXIS 181 (N.D. 2005).

Enforcement.

County did not discriminate against defendant in its enforcement of this section where merchant was permitted to send a notice of dishonor, whether or not a check was to be presented to the state’s attorney for prosecution was left to the discretion of the merchant, and the state attorney’s office would prosecute a bad check writer regardless of whether or not a notice of dishonor had been sent or payment had been made. State v. Schmitz, 431 N.W.2d 305, 1988 N.D. LEXIS 224 (N.D. 1988).

Notice of Dishonor.

Sending a notice of dishonor is permissive and not mandatory and the maker of the check has no right to receive notice of its dishonor. State v. Houn, 299 N.W.2d 563, 1980 N.D. LEXIS 316 (N.D. 1980).

Subsection 4 of this section merely permits, but does not require, a notice of dishonor to be sent, and therefore, it seems clear that defendant was not entitled as a matter of right to receive a notice of dishonor before being criminally charged. State v. Latendresse, 459 N.W.2d 234, 1990 N.D. LEXIS 151 (N.D. 1990).

Obtaining Money Under False Pretenses.

Defendant pleading guilty to obtaining money under false pretenses by passing checks without sufficient funds was subject to sentence under former N.D.C.C. §§ 12-38-04 and 12-38-07 as this section did not repeal or supersede by implication, either in whole or in part, the penalties applicable to violations of N.D.C.C. § 12-38-07. State v. Ziesemer, 93 N.W.2d 803, 1958 N.D. LEXIS 108 (N.D. 1958).

Postdated Check.

Knowing receipt of a postdated check by a payee provided the maker of the check a valid defense to a prosecution under this section. State v. Houn, 299 N.W.2d 563, 1980 N.D. LEXIS 316 (N.D. 1980).

Evidence sufficiently negated the existence of postdating defense contained in subsection 3 of this section where payee of check testified that check was not knowingly received as postdated; check was properly dated in usual place and no evidence explained cryptic notation, “10-20-89,” written in different ink on memo line of check. State v. Fasching, 461 N.W.2d 102, 1990 N.D. LEXIS 197 (N.D. 1990).

A payee’s knowing receipt of a postdated check is a defense under this section and the State, therefore, must prove its nonexistence beyond a reasonable doubt. State v. Hammond, 498 N.W.2d 126, 1993 N.D. LEXIS 53 (N.D. 1993).

Where defendant’s guilt or innocence turned on the factual question of whether the payee knowingly received defendant’s postdated check, the trial court wrongly usurped the role of the fact finder when it determined the issue at a pretrial conference. State v. Hammond, 498 N.W.2d 126, 1993 N.D. LEXIS 53 (N.D. 1993).

Restitution No Defense.

Defendant committed the crime when he wrote the check, and restitution did not bar criminal prosecution. State v. Latendresse, 459 N.W.2d 234, 1990 N.D. LEXIS 151 (N.D. 1990).

Shortage of Funds.

A known shortage of funds, for whatever reason, is no excuse for writing a bad check. State v. Latendresse, 459 N.W.2d 234, 1990 N.D. LEXIS 151 (N.D. 1990).

DECISIONS UNDER PRIOR LAW

Constitutionality.

Sentencing defendant to imprisonment as authorized for a class B misdemeanor for a violation of this section does not violate article I, section 15 of the state constitution, which prohibits imprisonment for debt, because such imprisonment is not for failure to pay a debt, but for issuing a check without sufficient funds either at the time of issuance or at the time of presentment if the check was presented for payment within one week of the original delivery. State v. McDowell, 312 N.W.2d 301, 1981 N.D. LEXIS 403 (N.D. 1981), cert. denied, 459 U.S. 981, 103 S. Ct. 318, 74 L. Ed. 2d 294, 1982 U.S. LEXIS 4199 (U.S. 1982).

A culpability element is not required to constitute a violation of this section as the violation thereof is a matter of strict criminal liability; lack of a culpability element does not make this section unconstitutional. State v. McDowell, 312 N.W.2d 301, 1981 N.D. LEXIS 403 (N.D. 1981), cert. denied, 459 U.S. 981, 103 S. Ct. 318, 74 L. Ed. 2d 294, 1982 U.S. LEXIS 4199 (U.S. 1982).

This section is unconstitutional and invalid in its entirety because, by making payment of a nonsufficient funds check an affirmative defense to a criminal charge, it creates a classification based upon wealth in violation of equal protection under the fourteenth amendment to the United States Constitution.State v. Fischer, 349 N.W.2d 16, 1984 N.D. LEXIS 302 (N.D. 1984).

This section as constituted in 1981, prior to its amendment in 1983, did not create any wealth-based classifications and did not violate constitutional guarantees of equal protection. State v. Mathisen, 356 N.W.2d 129, 1984 N.D. LEXIS 395 (N.D. 1984).

The effect of the constitutional infirmity of the inseverable 1983 amendments to this section was to render the 1983 version of this section a nullity, to be treated as if never enacted, thereby leaving intact the 1981 version until its valid repeal or amendment. Conviction based on the issuance of five bad checks in September, 1984, was upheld. State v. Clark, 367 N.W.2d 168, 1985 N.D. LEXIS 308 (N.D. 1985).

Although this section was not, on its face, defective, when combined with the practice here involved—after the office of the state’s attorney had sent the notice, over ninety-five percent of the persons charged with a violation of this section were people who had received the notice but who had not paid the check, and it was admitted that in most cases they would not have been prosecuted if they had paid the check—this practice effectively made the crime one for failure to pay, for if the check was paid there was no prosecution, and the section was, therefore, unconstitutional. State v. Ohnstad, 392 N.W.2d 389, 1986 N.D. LEXIS 380 (N.D. 1986).

Collateral References.

Nondrawing cosignor’s liability for joint checking account overdraft, 48 A.L.R.4th 1136.

Law Reviews.

Criminal Liability for Issuing Insufficient Funds Check: Comment on State v. Fischer, 349 N.W.2d 16 (1984), 61 N.D. L. Rev. 31 (1985).

6-08-16.1. Issuing check or draft without account — Penalty.

Any person who issues any check, draft, or order, or authorizes an electronic funds transfer, upon any bank or depository, for the payment of money, and, at the time of the issuance does not have an account with the bank or depository upon which the check, draft, electronic funds transfer authorization, or order was written, is guilty of a class A misdemeanor.

Source: S.L. 1961, ch. 110, § 2; 1975, ch. 106, § 56; 1989, ch. 107, § 1; 1995, ch. 91, § 1; 1999, ch. 79, § 2.

Notes to Decisions

Arrangement to Cover Check.

An arrangement whereby defendant’s mother left a check with the bank to cover a no-account check issued by defendant did not constitute a valid defense to the offense of issuing a no-account check where defendant did not have an account when the checks were issued, and the arrangement was not made until after defendant had been served with the complaint on one check and the other issued check had been presented and had been marked no-account. State v. Thiel, 303 N.W.2d 96, 1981 N.D. LEXIS 226 (N.D. 1981).

Commission of Offense.

The offense of issuing a no-account check is completed at the time the check is issued and the drawer does not have an account. State v. Thiel, 303 N.W.2d 96, 1981 N.D. LEXIS 226 (N.D. 1981).

Presentment.

To constitute the offense of issuing a no-account check, this section does not require presentment of the check when the drawee has notice that the drawer does not have an account. State v. Thiel, 303 N.W.2d 96, 1981 N.D. LEXIS 226 (N.D. 1981).

Procedure.

The language and procedure in N.D.C.C. § 6-08-16, which deals with insufficient funds, is not applicable to the offense of issuing a check without an account. State v. Thiel, 303 N.W.2d 96, 1981 N.D. LEXIS 226 (N.D. 1981).

6-08-16.2. Issuing check without account — Financial liability — Penalty — Exceptions.

  1. As used in this section unless the context otherwise requires:
    1. “Account” means any account at a bank or depository from which an instrument could legally be paid.
    2. “Dishonor” is synonymous with “nonpayment”.
    3. “Instrument” means any check, draft, electronic funds transfer authorization, or order for the payment of money.
    4. “Issues” means draws, utters, electronically authorizes, or delivers.
  2. A person that, for that person or as agent or representative of another, willfully as defined in section 12.1-02-02 issues any instrument is guilty of a class C felony if that person has been previously convicted of issuing an instrument without an account pursuant to section 6-08-16.1, and at the time of issuing the instrument the drawer does not have an account with the bank or depository on which the instrument is drawn.
  3. A person that, for that person or an agent or representative of another, willfully as defined in section 12.1-02-02 issues any instrument is guilty of a class C felony if the instrument was for at least one thousand dollars or that person, agent, or representative of another, issues more than one instrument for which the aggregate total of all instruments issued exceeds one thousand dollars, and at the time of issuing the instrument, the drawer does not have an account with the bank or depository on which the instrument is drawn.
  4. A person that issues an instrument under subsection 2 or 3 is liable for collection fees or costs not in excess of forty dollars per instrument which are recoverable by the holder of the instrument, or the holder’s agent or representative. If the state’s attorney or holder determines the person identified as the issuer of the instrument did not issue the instrument in violation of this section but instead is the victim of fraud, that state’s attorney or holder shall provide the holder or the holder’s agent or representative written notice of the fraud and upon receipt of the notice that holder or that holder’s agent or representative may not collect fees or costs under this subsection. The holder of the instrument or the holder’s agent or representative is entitled to bring a civil action to recover a civil penalty. The civil penalty is payment to the holder of the instrument of the lesser of two hundred dollars or three times the amount of each instrument.
  5. An agent acting for the receiver of an instrument issued in violation of this section may present the instrument to the state’s attorney for prosecution if the holder or the holder’s agent or representative mailed a notice under subsection 6. During the first one hundred twenty days after the drawer received notice under this subsection the state’s attorney shall accept the instrument presented by the agent. A criminal complaint for violating this section must be executed within one hundred twenty days after the drawer receives notice from the holder of a no-account or closed-account instrument or the holder’s agent or representative.
  6. A notice of dishonor may be mailed by the holder of the instrument upon dishonor or by the holder’s agent or representative upon dishonor. Proof of mailing may be made by return receipt or by an affidavit of mailing signed by the individual making the mailing. The notice must be in substantially the following form:

Notice of Dishonored Instrument Date Name of Issuer Street Address City and State You are according to law notified that an instrument dated , , drawn on the Bank of in the amount of has been returned unpaid with the notation the payment has been refused because (of nonsufficient funds)(the drawer does not have an account). Within ten days from the receipt of this notice, you must pay or tender to (Holder or agent or representative) sufficient moneys to pay such instrument in full and any collection fees or costs not in excess of forty dollars.

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The notice may also contain a recital of the penal provisions of this section and the possibility of a civil action to recover any collection fees or costs authorized by this section.

Source: S.L. 1977, ch. 77, § 1; 1981, ch. 120, § 2; 1981, ch. 362, § 1; 1983, ch. 116, § 2; 1985, ch. 127, § 2; 1985, ch. 128, § 1; 1991, ch. 89, § 2; 1993, ch. 78, § 1; 1997, ch. 89, § 2; 1997, ch. 90, § 2; 1999, ch. 51, § 3; 1999, ch. 79, § 3; 1999, ch. 80, § 2; 2001, ch. 94, § 2; 2001, ch. 95, § 2; 2007, ch. 315, § 2; 2011, ch. 77, § 2; 2013, ch. 79, § 2; 2013, ch. 104, § 2.

Cross-References.

Forgery and counterfeiting, see § 12.1-24-01.

Theft and related offenses, see § 12.1-23-01 et seq.

DECISIONS UNDER PRIOR LAW

Constitutionality.

This section is unconstitutional because it violates due process and equal protection under the Fourteenth Amendment to the United States Constitution and Article I, sections 11, 13, and 20 of the North Dakota Constitution.State v. Carpenter, 301 N.W.2d 106, 1980 N.D. LEXIS 326 (N.D. 1980).

Collateral References.

Nondrawing cosignor’s liability for joint checking account overdraft, 48 A.L.R.4th 1136.

Law Reviews.

Criminal Liability for Issuing Insufficient Funds Check: Comment on State v. Fischer, 349 N.W.2d 16 (1984), 61 N.D. L. Rev. 31 (1985).

6-08-16.3. Consolidation of offenses — Dishonored checks.

When the same person commits two or more offenses under sections 6-08-16, 6-08-16.1, and 6-08-16.2 in more than one county of this state, the offenses may be combined and prosecution may be brought in any county in which one of the dishonored checks was issued.

Source: S.L. 1995, ch. 92, § 1.

6-08-16.4. Return of paid checks to the issuer.

When the holder, or its agent or representative, of a check receives full payment for the amount of a check issued without sufficient funds or credit, or without account, the check must be returned to the issuer upon the payment of any civil penalty assessed if the issuer appears and requests the return of the check or the issuer furnishes a self-addressed stamped envelope.

Source: S.L. 1997, ch. 89, § 3.

6-08-17. Punishment of felonies. [Repealed]

Repealed by S.L. 1975, ch. 106, § 673.

6-08-18. Punishment of misdemeanors. [Repealed]

Repealed by S.L. 1975, ch. 106, § 673.

6-08-19. Punishment for offenses when corporation or association is convicted. [Repealed]

Repealed by S.L. 1975, ch. 106, § 673.

6-08-20. Penalties — How recovered.

All penalties provided for in this title, to which any association or corporation may become subject, must be recovered on complaint of the commissioner before any court of competent jurisdiction, and all penalties so recovered must be paid into the state treasury.

Source: S.L. 1890, ch. 23, § 21; 1893, ch. 27, § 21; R.C. 1895, § 3246; R.C. 1899, § 3246; S.L. 1905, ch. 165, § 22; R.C. 1905, § 4656; C.L. 1913, § 5171; S.L. 1931, ch. 96, § 67; R.C. 1943, § 6-0820.

6-08-21. Execution of instruments.

Any loan, trust, or banking corporation in its bylaws may empower any one or more of its officers severally or conjointly to execute and acknowledge in its behalf conveyances, transfers, assignments, releases, satisfactions, or other instruments affecting liens upon, titles to, or interests in real estate. In the absence of such provision in the bylaws, the president, secretary, treasurer, or cashier of any loan, trust, or banking corporation may execute and acknowledge such instruments on behalf of the corporation when authorized so to do by resolution of its board of directors.

Source: S.L. 1983, ch. 42, §§ 1, 2; R.C. 1895, §§ 3532, 3533; R.C. 1899, §§ 3532, 3533; R.C. 1905, §§ 4969, 4970; C.L. 1913, §§ 5512, 5513; S.L. 1937, ch. 118, §§ 1, 2; R.C. 1943, § 6-0821.

Cross-References.

Transfer of real estate and interest therein by corporation, see § 47-10-05.1.

6-08-22. Holiday transactions.

Nothing in any law in this state may in any manner whatsoever affect the validity of, or render void or voidable, the payment, certification, or acceptance of a check or other negotiable instrument or any other transaction by a bank or trust company in this state because done or performed during any other than regular banking hours, provided, further, that nothing herein may be construed to compel any bank or trust company in this state, which by law or custom is entitled to close at twelve noon on any Saturday, or for the whole or any part of any legal holiday, to keep open for the transaction of business, or to perform any of the acts or transactions aforesaid on any Saturday after such hour, or on any legal holiday, except at its own option.

Source: S.L. 1949, ch. 111, § 1; R.C. 1943, 1957 Supp., § 6-0822.

6-08-23. Retention of records.

No bank may be required to preserve and retain its records of accounts or files for a longer period than six years next after the first day of January of the year following the date of such record or files.

Source: S.L. 1949, ch. 111, § 1; R.C. 1943, 1957 Supp., § 6-0823.

6-08-24. Actions on accounts and claims limited.

No depositor or other creditor may commence an action against a bank on any account or claim of any kind after the expiration of the six-year period provided for in section 6-08-23, unless such depositor or creditor has, within such six-year period, made demand in writing on such bank requesting a settlement or adjustment of such claim; provided, however, that ledger sheets showing unpaid balances in favor of depositors may not be destroyed unless a photographic copy is retained in accordance with section 31-08-01.1, and nothing in sections 6-08-23 and 6-08-24 may be construed as limiting the time when actions may be brought to recover such balances.

Source: S.L. 1949, ch. 109, § 2; R.C. 1943, 1957 Supp., § 6-0824; S.L. 1965, ch. 91, § 1.

6-08-24.1. Disposition of certain unclaimed accounts. [Repealed]

Repealed by S.L. 1975, ch. 425, § 29.

6-08-25. When foreign bank or trust company may serve in fiduciary capacity in state — Reciprocity.

A bank or trust company organized and doing business under the laws of any state or territory of the United States of America, including the District of Columbia, other than the state of North Dakota, and a national bank, duly authorized so to act, may be appointed and may serve in this state as trustee, whether of a corporate or personal trust, executor, administrator, guardian for a minor or for an incompetent person, or in any other fiduciary capacity, whether the appointment is by will, deed, court order, or decree, or otherwise, when and to the extent that the state, territory, or district in which such bank or trust company is organized or has its principal place of business grants authority to serve in like fiduciary capacities to a bank or trust company organized and doing business under the laws of this state.

Source: S.L. 1953, ch. 98, § 1; R.C. 1943, 1957 Supp., § 6-0825.

6-08-26. Requirements of foreign bank or trust company serving as fiduciary in state.

Before qualifying or serving in this state in any fiduciary capacity as defined in section 6-08-25, such bank or trust company shall file in the office of the secretary of state a filing fee of fifty dollars, a copy of its charter certified by its secretary, and a power of attorney designating the said secretary of state or the secretary of state’s successor in office as the person upon whom all notices and processes issued by any court of this state may be served in any action or proceeding relating to any trust, estate, or matter within this state in respect of which such bank or trust company is acting in any fiduciary capacity with like effect as personal service on such bank or trust company. Such power of attorney is irrevocable so long as any such liability remains outstanding against such bank or trust company in this state. Upon receipt of such notice or process with a filing fee of twenty-five dollars, it is the duty of the said secretary of state forthwith to forward the same by registered or certified mail to such bank or trust company at the address stated in the said power of attorney, and such bank or trust company shall comply with the provisions of chapter 6-05, insofar as the provisions of said chapter pertain to banks or trust companies.

Source: S.L. 1953, ch. 98, § 2; R.C. 1943, 1957 Supp., § 6-0826; S.L. 1973, ch. 80, § 1; 1989, ch. 108, § 1; 1993, ch. 75, § 4.

6-08-27. Resident place of business, branch office, or agency authorized — Application.

A bank or trust company, organized and doing business under the laws of any other state, territory, or district than the state of North Dakota, including a national bank doing business in any other state, may establish in this state a place of business, branch office, or agency for the conduct of business as a fiduciary to the extent that the state, territory, or district in which such bank or trust company is organized or has its principal place of business grants authority for a North Dakota state-chartered bank or trust company to establish a place of business, branch office, or agency for the conduct of business as a fiduciary within that state’s, territory’s, or district’s jurisdiction.

Prior to the establishment of any place of business, branch office, or agency, under this section, a bank or trust company organized and doing business under the laws of any state or territory of the United States of America, or of the District of Columbia, other than the state of North Dakota, or a national bank doing business in any other state, territory, or district, must submit a copy of its application to the North Dakota department of financial institutions for review and comment.

Source: S.L. 1953, ch. 98, §§ 3, 4; R.C. 1943, 1957 Supp., § 6-0827; 2013, ch. 77, § 24.

Cross-References.

Estate administration, foreign personal representatives, see chs. 30.1-24, 30.1-25.

6-08-28. Penalty.

Any bank or trust company violating any provisions of sections 6-08-25 through 6-08-28 is guilty of a class A misdemeanor and, upon conviction thereof, may, in the discretion of the court, be prohibited thereafter from serving in this state in any fiduciary capacity.

Source: S.L. 1953, ch. 98, § 5; R.C. 1943, 1957 Supp., § 6-0828; S.L. 1975, ch. 106, § 57.

6-08-29. Annual escrow account statement.

Each banking institution and credit union that maintains an escrow account for the payment of taxes, assessments, insurance premiums, and other charges upon the mortgagor’s residence shall furnish annually each mortgagor with a detailed statement showing all debits and credits to the escrow account.

Source: S.L. 1991, ch. 90, § 1; 2003, ch. 71, § 2.

6-08-30. Limitation on control of deposits.

No financial institution or financial institution holding company may acquire direct or indirect ownership or control of more than twenty-five percent of North Dakota deposits through the direct or indirect acquisition of an interest in, ownership of, or control over another financial institution in this state. No financial institution or financial institution holding company may purchase the assets and assume the liabilities of a banking house or facility of any financial institution located in this state if the consummation of the acquisition results in the acquiring financial institution or financial institution holding company having direct or indirect interest in, ownership of, or control over more than twenty-five percent of North Dakota deposits. No financial institution may establish a facility outside the corporate city limits of the location of the main banking house or any authorized facility if the financial institution or its financial institution holding company has a direct or indirect interest in, ownership of, or control over more than twenty-five percent of North Dakota deposits. For purposes of this chapter, “North Dakota deposits” means North Dakota deposits as that term is defined in section 6-08.3-01.

Source: S.L. 1995, ch. 79, § 13.

6-08-31. Electronic funds transfer fees.

The operator of any electronic funds transfer facility providing for electronic funds transfer in this state may impose a transaction fee for the use of an electronic funds transfer facility if the imposition of the fee is disclosed at the time and in a manner that allows the user to terminate or cancel the transaction without incurring the transaction fee. The fee may be in addition to any other charge imposed by the operator at an electronic funds transfer facility or by any other financial institution. The name of the owner of an automated teller machine must be shown on each automated teller machine located separate from a financial institution.

Source: S.L. 1999, ch. 81, § 2.

6-08-32. Funds transfers — Disclosure to financial institution required.

A person may not direct, cause, arrange, or permit a transfer of funds by wire or automated clearinghouse into a financial institution account that is not owned by the intended beneficiary of the funds transfer unless the person has first disclosed to the financial institution the fact that the account is not owned by the intended beneficiary of the funds transfer and has obtained the express, written consent of the financial institution for each transfer. A person who directs, causes, arranges, or permits a transfer of funds by wire or automated clearinghouse into a financial institution account that is not owned by the intended beneficiary of the funds transfer may not withdraw the funds without the written consent of the accountholder and may not recover from the financial institution any damages, costs, or expenditures, including reasonable attorney’s fees, incurred in connection with the transfer or the use or withdrawal of the transferred funds by the owner of the account.

Source: S.L. 2001, ch. 96, § 1.

6-08-33. Unauthorized funds transfer — Liability.

A person who directs, causes, arranges, or permits a transfer of funds by wire or automated clearinghouse into a financial institution account that is not owned by the beneficiary of the funds transfer is liable to the financial institution for all damages, costs, or expenditures, including reasonable attorney’s fees, which the financial institution suffers or incurs in connection with the unauthorized funds transfer transaction or any use or withdrawal of the funds by the owner of the account.

Source: S.L. 2001, ch. 96, § 2.

6-08-34. Documenting customer identity.

Notwithstanding any other provision of law, a financial institution, trust company, or credit union may make and retain a copy of any motor vehicle operator’s license, permit, or nondriver’s photo identification card used in connection with the process of verifying the identity of a customer or potential customer.

Source: S.L. 2003, ch. 72, § 1.

6-08-35. Legal recognition of electronic records and electronic signatures.

A record or signature on a record or document may not be denied legal effect or enforceability solely because it is in electronic form. A contract between a financial institution and another person may not be denied legal effect or enforceability solely because an electronic record was used in its formation. If a provision requires a record to be in writing, an electronic record satisfies the requirement. If a provision requires a signature, an electronic signature satisfies the requirement.

Source: S.L. 2007, ch. 79, § 2.

6-08-36. Automated teller machines — Definitions — International charges — Application.

  1. In this section:
    1. “Automated teller machine” means any electronic information processing device or electronic funds transfer facility located in this state that accepts or disposes cash in connection with a credit, deposit, or other account. “Automated teller machine” does not include a device that is used solely to facilitate check guarantees or check authorizations, or that is used in connection with the acceptance or dispensing of cash on a person-to-person basis.
    2. “Foreign account” means an account with a financial institution located outside the United States.
  2. An agreement to operate or share an automated teller machine may not prohibit an owner or operator of the automated teller machine from imposing on an individual who conducts a transaction using a foreign account an access fee or surcharge that is not otherwise prohibited under federal or state law.
  3. This section first applies to agreements entered into, modified, or renewed after August 1, 2009.

Source: S.L. 2009, ch. 100, § 1.

Effective Date.

This section became effective August 1, 2009.

CHAPTER 6-08.1 Disclosure of Customer Information

6-08.1-01. Definitions.

As used in this chapter:

  1. “Customer” means any person that is a resident of or is domiciled in this state and which has transacted or is transacting business with or has used or is using the services of a financial institution, or for which a financial institution has acted as a fiduciary with respect to trust property.
  2. “Customer information” means either of the following:
    1. Any original or any copy of any records held by a financial institution pertaining to a customer’s relationship with the financial institution.
    2. Any information derived from a record described in this subsection.
  3. “Financial institution” means any organization authorized to do business under state or federal laws relating to financial institutions, including, without limitation, a bank, including the Bank of North Dakota, a savings bank, a trust company, a savings and loan association, or a credit union.
  4. “Financial institution regulatory agency” means any of the following:
    1. The federal deposit insurance corporation.
    2. The federal savings and loan insurance corporation.
    3. The national credit union administration.
    4. The federal reserve board.
    5. The United States comptroller of the currency.
    6. The department of financial institutions.
    7. The federal home loan bank board.
  5. “Governmental agency” means any agency or department of this state, or any authorized officer, employee, or agent of an agency or department of this state.
  6. “Law enforcement agency” means any agency or department of this state or of any political subdivision of this state authorized by law to enforce the law and to conduct or engage in investigations or prosecutions for violations of law.

Source: S.L. 1985, ch. 129, § 1; 1993, ch. 54, § 106; 2001, ch. 88, § 25; 2001, ch. 97, § 1; R.M. disapproved June 11, 2002, S.L. 2003, ch. 575; 2003, ch. 73, § 1; 2019, ch. 123, § 4, effective July 1, 2019.

6-08.1-02. Exemptions.

This chapter does not apply to any of the following:

  1. The disclosure of necessary customer information in the preparation, examination, handling, or maintenance of any customer information by any officer, employee, or agent of a financial institution having custody of such information or in the examination of such necessary information by an accountant engaged by the financial institution to perform an audit.
  2. The disclosure of necessary customer information in the examination of any customer information by or the furnishing of customer information to any officer, employee, or agent of a financial institution regulatory agency solely for use in the exercise of that person’s duties.
  3. The publication of data derived from customer information if the data cannot be identified to any particular customer or account.
  4. Any acts required of the financial institution by the Internal Revenue Code.
  5. Disclosures permitted under the Uniform Commercial Code concerning the dishonor of any negotiable instrument.
  6. The exchange in the regular course of business of necessary customer credit information between a financial institution and other financial institutions or commercial entities, directly or through a customer reporting agency.
  7. The release by the industrial commission, in its capacity as the managing body of the Bank of North Dakota, of the following:
    1. The name of any person who has obtained approval for direct or indirect financing or security, including a loan guarantee or a letter of credit, through the Bank of North Dakota primarily for purposes other than personal, family, or household purposes.
    2. The amount of any financing or security referenced in subdivision a.
    3. The amount of any net writeoff or loan forgiveness associated with the financing or security referenced in subdivision a which the industrial commission determines is uncollectible.
    4. The program under which any financing or security referenced in subdivision a was made.
    5. Recipient reports and grantor reports as required under chapter 54-60.1.
  8. The disclosure of customer information in the examination, handling, or maintenance of any customer information by any governmental agency or law enforcement agency for purposes of verifying information necessary in the licensing process, provided prior consent is obtained from the licensee and customer.
  9. Disclosure of customer information to a law enforcement agency or governmental agency pursuant to a search warrant or subpoena duces tecum issued in accordance with applicable statutes or the North Dakota Rules of Criminal Procedure.
  10. Disclosure by a financial institution to the agriculture commissioner that it has given a customer notice of the availability of the North Dakota mediation service.
  11. The disclosure by a financial institution to any financial institution or other entity that controls, is controlled by, or is under common control with the financial institution if the financial institution or other entity receiving the information complies with section 6-08.1-03.
  12. A disclosure of customer information under section 502(e) of the federal Financial Services Modernization Act of 1999 [Pub. L. 106-102; 113 Stat. 1436; 15 U.S.C. 6802(e)]. A disclosure under this subsection must comply with the rules adopted under section 6-08.1-10.
  13. A disclosure made to the disciplinary board of the North Dakota supreme court or another state’s authority with responsibility for enforcing rules of professional conduct for lawyers regarding dishonor of an instrument issued against any trust account maintained by an attorney or law firm, as these terms are defined in section 6-08-16.2.

Source: S.L. 1985, ch. 129, § 1; 1987, ch. 122, § 1; 1989, ch. 109, § 1; 1997, ch. 91, § 1; 2001, ch. 97, § 2; R.M. disapproved June 11, 2002, S.L. 2003, ch. 575; 2003, ch. 73, § 2; 2003, ch. 74, § 1; 2005, ch. 88, § 1; 2005, ch. 537, § 1; 2009, ch. 266, § 1; 2011, ch. 83, § 2.

6-08.1-03. Duty of confidentiality. [Effective through August 31, 2022]

A financial institution may not disclose customer information to a person, governmental agency, or law enforcement agency unless the disclosure is made in accordance with any of the following:

  1. Pursuant to consent granted by the customer in accordance with this chapter.
  2. To a person other than a governmental agency or law enforcement agency pursuant to valid legal process.
  3. To a governmental agency or law enforcement agency pursuant to valid legal process in accordance with this chapter.
  4. For the purpose of reporting a suspected violation of the law in accordance with this chapter.
  5. For the purpose of notifying the agriculture commissioner a financial institution has notified a customer of the availability of the North Dakota mediation service.
  6. As part of the disclosure made of deposits of public corporations with financial institutions in the security pledge schedule verified by the custodian of securities pursuant to section 21-04-09.
  7. For purposes of reporting suspected exploitation of an eligible adult as defined by section 12.1-31-07. This subsection may not be construed to impose a duty on a financial institution to investigate an alleged or suspected exploitation of an eligible adult or to make a report to a governmental agency or law enforcement agency.
  8. For purposes of reporting suspected financial exploitation of an eligible adult under chapter 6-08.5 to a law enforcement agency or the department of human services. This subsection may not be construed to impose a duty on a financial institution to investigate a suspected financial exploitation of an eligible adult or to make a report to the department of human services or law enforcement agency.

Source: S.L. 1985, ch. 129, § 1; 1989, ch. 109, § 2; 1995, ch. 93, § 1; 2001, ch. 98, § 1; 2011, ch. 83, § 3; 2017, ch. 74, § 1, effective August 1, 2017; 2019, ch. 80, § 1, effective August 1, 2019.

Collateral References.

Rights and remedies of financial institution customer in relation to subpoena duces tecum exception to general prohibitions of state right to financial privacy statute, 43 A.L.R.4th 1157.

Bank’s liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

6-08.1-03. Duty of confidentiality. [Effective September 1, 2022]

A financial institution may not disclose customer information to a person, governmental agency, or law enforcement agency unless the disclosure is made in accordance with any of the following:

  1. Pursuant to consent granted by the customer in accordance with this chapter.
  2. To a person other than a governmental agency or law enforcement agency pursuant to valid legal process.
  3. To a governmental agency or law enforcement agency pursuant to valid legal process in accordance with this chapter.
  4. For the purpose of reporting a suspected violation of the law in accordance with this chapter.
  5. For the purpose of notifying the agriculture commissioner a financial institution has notified a customer of the availability of the North Dakota mediation service.
  6. As part of the disclosure made of deposits of public corporations with financial institutions in the security pledge schedule verified by the custodian of securities pursuant to section 21-04-09.
  7. For purposes of reporting suspected exploitation of an eligible adult as defined by section 12.1-31-07. This subsection may not be construed to impose a duty on a financial institution to investigate an alleged or suspected exploitation of an eligible adult or to make a report to a governmental agency or law enforcement agency.
  8. For purposes of reporting suspected financial exploitation of an eligible adult under chapter 6-08.5 to a law enforcement agency or the department of health and human services. This subsection may not be construed to impose a duty on a financial institution to investigate a suspected financial exploitation of an eligible adult or to make a report to the department of health and human services or law enforcement agency.

Source: S.L. 1985, ch. 129, § 1; 1989, ch. 109, § 2; 1995, ch. 93, § 1; 2001, ch. 98, § 1; 2011, ch. 83, § 3; 2017, ch. 74, § 1, effective August 1, 2017; 2019, ch. 80, § 1, effective August 1, 2019; 2021, ch. 352, § 4, effective September 1, 2022.

6-08.1-03.1. Agricultural and commercial accounts. [Repealed]

Disapproved by R.M. June 11, 2002, S.L. 2003, ch. 575.

6-08.1-04. Consent.

  1. No consent or waiver shall be required as a condition of doing business with any financial institution, and any consent or waiver obtained from a customer as a condition of doing business with a financial institution shall not be deemed a consent of the customer for the purpose of this chapter.
  2. A valid consent must be in writing and signed by the customer. In consenting to disclosure of customer information, a customer may specify any of the following:
    1. The time during which such consent will operate.
    2. The customer information to be disclosed.
    3. The persons, governmental agencies, or law enforcement agencies to which disclosure may be made.

Source: S.L. 1985, ch. 129, § 1.

6-08.1-05. Government access.

  1. A governmental agency or law enforcement agency may obtain customer information from a financial institution pursuant to either of the following:
    1. The consent of the customer, in accordance with this chapter.
    2. Valid legal process, in accordance with this section.
  2. A governmental agency or law enforcement agency may obtain customer information from a financial institution pursuant to a judicial or administrative subpoena duces tecum served on the financial institution, if there is reason to believe that the customer information sought is relevant to a proper law enforcement objective or is otherwise authorized by law.
  3. A governmental agency or law enforcement agency may obtain customer information from a financial institution pursuant to a search warrant if it obtains the search warrant pursuant to the rules of criminal procedure of this state. Examination of the customer information may occur as soon as it is reasonably practicable after the warrant is served on the financial institution.

Source: S.L. 1985, ch. 129, § 1; 1987, ch. 122, § 2.

Collateral References.

Rights and remedies of financial institution customer in relation to subpoena duces tecum exception to general prohibitions of state right to financial privacy statute, 43 A.L.R.4th 1157.

6-08.1-06. Suspicion of unlawful conduct.

  1. Nothing in this chapter precludes a financial institution from initiating contact with, and thereafter communicating with and disclosing customer information to, a law enforcement agency when the financial institution reasonably believes that the customer about whom such information pertains:
    1. Is engaged in unlawful activity; or
    2. Is defrauding the financial institution.
  2. Conviction of the customer or admission by the customer shall be conclusive of the reasonableness of the disclosure for purposes of this section.
  3. The burden is on the financial institution to show that at the time the disclosure was made, the disclosure was reasonable for the purposes of this section.

Source: S.L. 1985, ch. 129, § 1.

6-08.1-07. Cost reimbursement.

Any governmental agency, law enforcement agency, or person requiring or requesting access to customer information shall pay to the financial institution that assembles or provides the customer information a fee for reimbursement of reasonably necessary costs which have been directly incurred by the financial institution. A financial institution must deliver the customer information sought as soon as reasonably possible notwithstanding any dispute concerning the amount of reimbursement due under this section. A separate action may be maintained by the financial institution against the governmental agency, law enforcement agency, or person requesting access for recovery of reasonable reimbursement. The financial institution may not charge the state auditor for customer information requested when performing an audit; however, the financial institution may charge the entity being audited by the state auditor for the information requested.

Source: S.L. 1985, ch. 129, § 1; 1987, ch. 122, § 3; 1987, ch. 123, § 1.

6-08.1-08. Liability.

  1. A financial institution, governmental agency, law enforcement agency, or any other person is liable to the customer for intentional violations of this chapter in an amount equal to the greater of the following:
    1. One thousand dollars.
    2. Actual damages caused by the disclosure of the customer information.
  2. Any financial institution, governmental agency, law enforcement agency, or other person that takes any action pursuant to this chapter, relying in good faith on any provision of this chapter, may not be held liable to any person for its actions.

Source: S.L. 1985, ch. 129, § 1.

6-08.1-09. Joint marketing agreements — Consent.

A financial institution must have a customer’s consent before the financial institution may disclose the customer’s information to a nonaffiliated third party under a joint marketing agreement as provided under section 502(b)(2) of the federal Financial Services Modernization Act of 1999 [Pub. L. 106-102; 113 Stat. 1437; 15 U.S.C. 6802(b)(2)].

Source: S.L. 2003, ch. 73, § 3.

6-08.1-10. Rules.

The state banking board and the state credit union board shall adopt rules to implement subsection 12 of section 6-08.1-02. The rules must provide at least as much customer protection as would be provided in the case of disclosure of information under circumstances in which there has been an opt-out election under title V of the federal Financial Services Modernization Act of 1999 [Pub. L. 106-102; 113 Stat. 1436].

Source: S.L. 2003, ch. 73, § 4.

CHAPTER 6-08.2 Sale of Banking Institutions Owned by Charitable Trusts

6-08.2-01. Sale of banking institutions owned by charitable trusts.

Expired under S.L. 1987, ch. 124, § 9.

6-08.2-02. Presentment of plan of acquiring entity to the state department of financial institutions.

Prior to any acquisition under this chapter, the acquiring entity must present a plan to the state department of financial institutions. The plan must provide that the acquiring entity commits itself to the condition that it capitalize each bank to be acquired in this state according to the applicable banking laws of this state and the requirements of the federal deposit insurance corporation or any applicable federal banking laws.

Source: S.L. 1987, ch. 124, § 3; 2001, ch. 88, § 26.

6-08.2-03. Offer to purchase minority stock required.

Any bank holding company owned by a charitable trust that sells, assigns, merges, or transfers the stock of any bank or bank holding company pursuant to this chapter shall communicate to and offer to purchase the stock of any minority stockholder of the bank or bank holding company. The offer must be made to minority stockholders at least sixty days before the date of the sale and must extend thirty days after the sale of the bank or bank holding company. The offer must remain open for at least ninety days or for the same period as that which is offered to minority stockholders of the company’s banks located in other states, whichever period is greater. The offer to purchase minority stock in banks in this state must be based on at least the same criteria, standards, and formula as may be used by the bank holding company in computing an offer to purchase the minority stock of its banks in other states. The resulting offer to purchase must be on the same or better terms as any previous offer made by the bank holding company except for those previous offers made by reason of repurchase options between the bank holding company and the stockholder. Such repurchase options may not be used as a basis for determining the offer to purchase other minority stock.

Source: S.L. 1987, ch. 124, § 4.

6-08.2-04. Grants requirement — Commitment — Reports to attorney general.

Any charitable trust that divests itself of any interest pursuant to this chapter shall file a commitment with the attorney general prior to any divestiture that the charitable trust will, subject to the provisions of the trust instrument pursuant to which the trust was created, continue to make grants under the provisions of the trust to recipients within this state. The charitable trust must report annually to the attorney general describing the grants made by the charitable trust to all recipients in the previous year. Upon the basis of such information, or other information that may be brought to the attorney general’s attention, the attorney general may initiate further investigation and ensure compliance with the requirements of this section.

Source: S.L. 1987, ch. 124, § 5.

6-08.2-05. Designation of agent for service of process.

Any charitable trust that divests itself of any interest pursuant to this chapter shall designate the secretary of state as its agent for service of process in this state.

Source: S.L. 1987, ch. 124, § 6.

6-08.2-06. Limitations.

  1. The authority granted by this chapter does not authorize the acquiring entity to resell, reassign, merge, or transfer stock or assets of any state or national bank or bank holding company acquired under this chapter except as permitted under the laws of this state.
  2. This chapter does not limit or restrict the rights of a charitable trust to sell, assign, merge, or transfer the stock or assets of any state or national bank or bank holding company owned directly or indirectly by the charitable trust under the provisions of any existing or hereafter adopted state or federal law or regulation.
  3. This chapter does not permit the sale, assignment, merger, or transfer by a charitable trust that directly or indirectly owns banks in Minnesota as well as in North Dakota of the stock or assets of any state or national bank or bank holding company located in this state if the sale, assignment, merger, or transfer by the charitable trust would be prohibited under the laws of Minnesota.

Source: S.L. 1987, ch. 124, § 7.

6-08.2-07. Provisions not severable.

Notwithstanding section 1-02-20, if any provision of this chapter is determined by any court of competent or final jurisdiction to be invalid or unconstitutional, this entire chapter is void.

Source: S.L. 1987, ch. 124, § 8.

CHAPTER 6-08.3 Reciprocal Interstate Banking

6-08.3-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Adequately capitalized” means a level of capitalization that meets or exceeds all applicable federal regulatory capital standards.
  2. “Board” means the state banking board.
  3. “Commissioner” means the commissioner of financial institutions.
  4. “Default” means default as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813].
  5. “Deposit” means deposit as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813].
  6. “Depository institution” means depository institution as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813].
  7. “Depository institution holding company” means depository institution holding company as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813].
  8. “Federal reserve” means the board of governors of the federal reserve system or any successor thereto.
  9. “In danger of default” means in danger of default as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813].
  10. “North Dakota deposits” means all deposits held at branches or offices located in this state of all depository institutions, based upon the public reports most recently filed with the appropriate regulatory agency.

Source: S.L. 1991, ch. 91, § 1; 1995, ch. 79, § 14; 2001, ch. 88, § 27.

6-08.3-02. Application to acquire a bank or bank holding company. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

6-08.3-02.1. Application to acquire a state-chartered or national bank.

An out-of-state bank holding company may acquire a North Dakota state-chartered or national bank pursuant to the approval process applicable for in-state acquisitions and under the conditions of this chapter. An out-of-state bank holding company shall provide notice to the board at the time an application or notice is filed with the applicable federal regulatory agency to acquire a North Dakota bank. Notwithstanding any provision to the contrary in this title, an out-of-state bank holding company that owned a depository institution as defined in section 6-08.3-01, the main office of which was located in this state on January 1, 1997, may reorganize that depository institution’s North Dakota operations as a newly chartered state or national bank in this state.

Source: S.L. 1995, ch. 79, § 15; 1997, ch. 92, § 1.

6-08.3-03. Disapproval — Grounds. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

6-08.3-03.1. Deposit limitation.

  1. A depository institution or depository institution holding company may not consolidate or merge with, or acquire a North Dakota depository institution or a depository institution holding company that controls a North Dakota depository institution if the federal reserve, comptroller of the currency, federal deposit insurance corporation, or office of thrift supervision, as the case may be, determines that the depository institution or a depository institution holding company will control more than twenty-five percent of North Dakota deposits.
  2. The federal reserve, comptroller of the currency, or federal deposit insurance corporation, as the case may be, may approve an acquisition or merger under this title without regard to the limitations of this section, if the transaction involves an acquisition or merger:
    1. Of one or more depository institutions in default or in danger of default; or
    2. With respect to which assistance is provided under section 13(c) of the Federal Deposit Insurance Act [12 U.S.C. 1823(c)].

Source: S.L. 1995, ch. 79, § 17.

6-08.3-04. New bank application. [Repealed]

Repealed by S.L. 1997, ch. 92, § 3.

6-08.3-05. Applicant capital requirement. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

6-08.3-06. Notice of disapproval — Hearing. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

6-08.3-07. Divestiture — Cease and desist.

  1. If a reciprocating state bank holding company makes an acquisition other than in full compliance with the requirements and procedures of this chapter, the board may, by order:
    1. Immediately require the reciprocating state bank holding company to divest itself of its direct or indirect ownership or control of any bank located in this state; or
    2. Require the reciprocating state bank holding company to cease and desist the violations by a certain date.
  2. The order is subject to the procedures applicable to cease and desist proceedings under section 6-01-04.2 and any applicable rules.

Source: S.L. 1991, ch. 91, § 7.

6-08.3-08. Supervision — Examinations.

The commissioner may enter into cooperative and reciprocal agreements with federal or other state bank regulatory authorities for exchange or acceptance of reports of examination and other records from the authorities in lieu of conducting examinations of acquiring reciprocating state bank holding companies. The commissioner may enter into joint actions with federal or other state bank regulatory authorities to carry out responsibilities under this chapter and assure compliance with the laws of this state.

Source: S.L. 1991, ch. 91, § 8.

6-08.3-09. Reports.

A reciprocating state bank holding company that directly or indirectly, through any subsidiary, acquires a bank pursuant to this chapter shall file with the board copies of all regular and periodic reports that the bank holding company is required to file under section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended [ch. 404; 48 Stat. 881; 15 U.S.C. 78m and 78o(d)], but excluding any portions not available to the public, and such other reports as the board may require by rule.

Source: S.L. 1991, ch. 91, § 9.

6-08.3-09.1. Reporting requirements.

An out-of-state bank holding company that filed an application under chapter 6-08.3 which was approved by the board before September 29, 1995, shall comply with the reporting requirements of section 6-08.3-09 for a period of five years from the date that the application was approved or longer if extended by the board due to noncompliance with the requirements of chapter 6-08.3 or order of the board approving the application.

Source: S.L. 1995, ch. 79, § 16.

6-08.3-10. Public information and participation — Notice. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

6-08.3-11. Exception. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

6-08.3-12. Reporting of loans. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

6-08.3-13. Interstate banking authorization.

This chapter specifically authorizes, in accordance with section 3 of the Bank Holding Company Act of 1956 [12 U.S.C. 1842], and section 101 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 [Pub. L. 103-328; 108 Stat. 2338; 12 U.S.C. 1811 et seq.], interstate banking in this state. However, to the extent a state imposes a restriction on the ability of a North Dakota bank holding company to acquire a bank in that state and the restriction is based on the length of time either bank has existed, that restriction must apply to any acquisition of a North Dakota bank by a bank holding company located in that state but does not apply to any bank established in this state on July 31, 1997.

Source: S.L. 1991, ch. 91, § 13; 1995, ch. 79, § 19; 1997, ch. 92, § 2; 2001, ch. 15, § 23.

6-08.3-14. Provisions not severable. [Repealed]

Repealed by S.L. 1995, ch. 79, § 25.

CHAPTER 6-08.4 Interstate Branching

6-08.4-01. Definitions.

For purposes of this chapter, unless the context otherwise requires:

  1. “Affiliate” means a company that controls, is controlled by, or is under common control with another company.
  2. “Bank” means insured depository institution as defined in 12 U.S.C. 1813(c)(2), but the term does not include “foreign bank” as defined in 12 U.S.C. 3101(7), except any foreign bank organized under the laws of a territory of the United States, the deposits of which are insured by the federal deposit insurance corporation.
  3. “Commercial activities” means activities in which a bank holding company, a financial holding company, a national bank, or a national bank financial subsidiary may not engage under federal law.
  4. “Home state” means:
    1. With respect to a national bank, the state in which the main office is located; and
    2. With respect to a state bank, the state by which the bank is chartered.
  5. “Transaction” means a bank’s establishment, operation, and, as applicable, retention of a bank branch office in a state other than its home state, whether de novo, by acquisition of a separate branch office, or through a merger of a North Dakota bank with another bank.

Source: S.L. 1995, ch. 79, § 20; 2003, ch. 75, § 1; 2007, ch. 86, § 1.

6-08.4-02. Interstate branches.

Subject to section 6-08.4-06, the responsible federal regulatory authority may approve a transaction under the Federal Deposit Insurance Act [Pub. L. 81-967; 64 Stat. 87; 12 U.S.C. 1811 et seq.].

Source: S.L. 1995, ch. 79, § 20; 2003, ch. 75, § 3.

6-08.4-03. Authority of state banks to establish interstate branches.

Notwithstanding section 6-08.4-02, a North Dakota state-chartered bank, with approval of the commissioner or board, may establish, acquire, retain, and operate one or more branches in a state other than this state. An application must be filed with the commissioner or board at the time an application is filed with the responsible federal regulatory authority. The North Dakota state-chartered bank must also comply with section 6-03-11 or 6-03-13.3, as applicable. The commissioner or board may approve the transaction if the commissioner or board finds that:

  1. The proposed transaction will not be detrimental to the safety and soundness of the North Dakota state-chartered bank;
  2. Any new officers and directors are qualified, and possess appropriate experience and financial responsibility; and
  3. The proposed transaction is consistent with the convenience and needs of the communities to be served by the bank in this state and is otherwise in the public interest.

If the commissioner’s decision with respect to an application is unfavorable, the applicant bank may appeal the decision to the board by filing a notice of appeal with the commissioner within twenty days after the commissioner has notified the applicant bank of the decision.

Source: S.L. 1995, ch. 79, § 20; 2003, ch. 75, § 4; 2007, ch. 80, § 4.

6-08.4-04. Interstate merger transactions and branching permitted.

Effective May 31, 1997, one or more North Dakota banks may merge with one or more out-of-state banks under this chapter, and an out-of-state bank resulting from an interstate merger may maintain and operate branches of a merged North Dakota bank in this state if the conditions and filing requirements of this title are met.

Source: S.L. 1995, ch. 79, § 20.

6-08.4-05. Notice and filing requirements.

Any out-of-state bank that proposes a transaction for a branch in this state must notify and submit a copy of its transaction application to the board not later than the date on which it files the application with the responsible federal regulatory authority.

Source: S.L. 1995, ch. 79, § 20; 2003, ch. 75, § 5.

6-08.4-06. Powers.

  1. An out-of-state state-chartered bank that establishes, acquires, and retains one or more branches in this state under this chapter may conduct any activities at the branch or branches that are authorized under the laws for North Dakota state banks, except to the extent those activities may be prohibited by the laws, rules, or orders of the home state applicable to the out-of-state state-chartered bank.
  2. A North Dakota state-chartered bank may conduct any activities at any branch outside this state which are permissible for an out-of-state state-chartered bank where the branch is located, except to the extent those activities are expressly prohibited by North Dakota law, rule, or order.
  3. A bank may not establish or maintain a branch in this state on the premises or property or within one mile [1.60 kilometers] of the premises or property of an affiliate if the affiliate engages in commercial activities.

Source: S.L. 1995, ch. 79, § 20; 2003, ch. 75, § 6; 2007, ch. 86, § 2.

6-08.4-06.1. Reciprocity required.

To the extent a state imposes a restriction on the ability of a North Dakota bank to establish, acquire, or retain a branch in that state, that restriction must apply to the establishment, acquisition, or retention of a branch in this state by the out-of-state bank.

Source: S.L. 2003, ch. 75, § 2.

6-08.4-07. Enforcement.

If the board or commissioner determines that a branch maintained by an out-of-state state-chartered bank is being operated in violation of any provision of North Dakota law, or that the branch is being operated in an unsafe and unsound manner, the board or commissioner has the same authority to take all enforcement actions as if the branch were a North Dakota state-chartered bank.

Source: S.L. 1995, ch. 79, § 20.

6-08.4-08. Powers of industrial bank.

An industrial bank may not accept deposits or make loans at a commercial location unless the industrial bank is owned by a financial holding company as defined in 12 U.S.C. 1841(p). For purposes of this section, “commercial location” means a location owned, operated, leased, or otherwise controlled by an entity that derives fifteen percent or more of its annual gross revenues, on a consolidated basis, including all affiliates of the entity, from engaging, on an ongoing basis, in activities that are not financial in nature or incidental to a financial activity during at least three of the prior four calendar quarters, as determined by the department of financial institutions.

Source: S.L. 2009, ch. 101, § 1.

CHAPTER 6-08.5 Financial Exploitation Prevention

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019.

6-08.5-01. Definitions.

As used in this chapter:

  1. “Account” means funds or assets held by a financial service provider, including a deposit account, savings account, share account, certificate of deposit, trust account, individual retirement account, guardianship or conservatorship account, investment or securities account, retirement account, loan, extension of credit, or safe deposit box.
  2. “Eligible adult” means an individual who is at least sixty-five years of age or a vulnerable adult as defined in section 50-25.2-01.
  3. “Financial exploitation” means the wrongful or unauthorized taking, withholding, appropriation, or use of an eligible adult’s money, assets, or property for one’s own benefit or the benefit of a third party. The term includes defrauding an eligible adult.
  4. “Financial service provider” means a financial institution, credit union, savings and loan association, or trust company.
  5. “Financial transaction” means any of the following as applicable to the business or services provided by a financial service provider:
    1. A transfer or request to transfer or disburse funds or assets in an account;
    2. A request to initiate a wire transfer, initiate an automated clearing house transfer, or issue a money order, cashier’s check, or official check;
    3. A request to negotiate a check or other negotiable instrument;
    4. A request to change the ownership of an account;
    5. A request for a loan, extension of credit, or draw on a line of credit; or
    6. A request to designate or change the designation of a beneficiary to receive any property, benefit, or contract right for an eligible adult.
  6. “Law enforcement agency” means an agency authorized by law to enforce the law and to conduct or engage in investigations or prosecutions for violations of the law.

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019.

6-08.5-02. Eligible adult financial exploitation prevention — Duration of refusal or hold — Notification and reporting — Immunity. [Effective through August 31, 2022]

  1. If a financial service provider has a good faith belief to suspect financial exploitation occurred, was attempted, or is being attempted, the financial service provider may refuse a financial transaction or hold a financial transaction on an account:
    1. Belonging to the eligible adult;
    2. On which the eligible adult is a beneficiary, including a trust, guardianship, or conservatorship account; or
    3. Belonging to a person suspected of perpetrating financial exploitation.
  2. A financial service provider may refuse a financial transaction or hold a financial transaction under this section if the department of human services or a law enforcement agency provides information to the financial service provider demonstrating it is reasonable to believe financial exploitation occurred, was attempted, or is being attempted.
  3. Subsection 2 does not require a financial service provider to refuse a financial transaction or hold a financial transaction if provided with information by the department of human services or a law enforcement agency alleging financial exploitation occurred, was attempted, or is being attempted. Except as ordered by a court, a financial service provider may determine whether to refuse a financial transaction or hold a financial transaction based on the information available to the financial service provider.
  4. A financial service provider refusing a financial transaction or holding a financial transaction based on a good faith belief to suspect financial exploitation occurred, was attempted, or is being attempted shall:
    1. Except with regard to an account administered by a bank or trust company in a fiduciary capacity, make a reasonable effort to notify, orally or in writing, one or more parties authorized to transact business on the account; and
    2. Report the incident to the department of human services, if the incident involves financial exploitation of a vulnerable adult as defined in section 50-25.2-01.
  5. Notice under this section is not required to be provided to a party authorized to conduct business on the account if the party is the suspected perpetrator of financial exploitation.
  6. A financial service provider, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability:
    1. For refusing or not refusing a financial transaction, or for holding or not holding a financial transaction under this section; or
    2. For actions taken in furtherance of the determination made under subdivision a, if the determination is based upon a good faith belief financial exploitation occurred, was attempted, or is being attempted.
    3. Belonging to a person suspected of perpetrating financial exploitation.

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019.

6-08.5-02 Eligible adult financial exploitation prevention — Duration of refusal or hold — Notification and reporting — Immunity. [Effective September 1, 2022]

1. If a financial service provider has a good faith belief to suspect financial exploitation occurred, was attempted, or is being attempted, the financial service provider may refuse a financial transaction or hold a financial transaction on an account:

a. Belonging to the eligible adult;

b. On which the eligible adult is a beneficiary, including a trust, guardianship, or conservatorship account; or

2. A financial service provider may refuse a financial transaction or hold a financial transaction under this section if the department of health and human services or a law enforcement agency provides information to the financial service provider demonstrating it is reasonable to believe financial exploitation occurred, was attempted, or is being attempted.

3. Subsection 2 does not require a financial service provider to refuse a financial transaction or hold a financial transaction if provided with information by the department of health and human services or a law enforcement agency alleging financial exploitation occurred, was attempted, or is being attempted. Except as ordered by a court, a financial service provider may determine whether to refuse a financial transaction or hold a financial transaction based on the information available to the financial service provider.

4. A financial service provider refusing a financial transaction or holding a financial transaction based on a good faith belief to suspect financial exploitation occurred, was attempted, or is being attempted shall:

a. Except with regard to an account administered by a bank or trust company in a fiduciary capacity, make a reasonable effort to notify, orally or in writing, one or more parties authorized to transact business on the account; and

b. Report the incident to the department of health and human services, if the incident involves financial exploitation of a vulnerable adult as defined in section 50-25.2-01.

5. Notice under this section is not required to be provided to a party authorized to conduct business on the account if the party is the suspected perpetrator of financial exploitation.

6. A financial service provider, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability:

a. For refusing or not refusing a financial transaction, or for holding or not holding a financial transaction under this section; or

b. For actions taken in furtherance of the determination made under subdivision a, if the determination is based upon a good faith belief financial exploitation occurred, was attempted, or is being attempted.

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019; 2021, ch. 352, § 5, effective September 1, 2022.

6-08.5-03. Reporting to a law enforcement agency or the department of human services — Immunity. [Effective through August 31, 2022]

  1. If a financial service provider, or an employee, officer, or director of a financial service provider has a good faith belief to suspect financial exploitation of an eligible adult occurred, was attempted, or is being attempted, the financial service provider, or an employee, officer, or director of a financial service provider may report the information to a law enforcement agency or the department of human services.
  2. This section does not impose a duty on a financial institution to investigate a suspected financial exploitation of an eligible adult or to make a report to a law enforcement agency or the department of human services.
  3. A financial service provider, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability for reporting or not reporting under this section if the determination is made based on a good faith belief that financial exploitation occurred, was attempted, or is being attempted.

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019.

6-08.5-03 Reporting to a law enforcement agency or the department of health and human services — Immunity. [Effective September 1, 2022]

1. If a financial service provider, or an employee, officer, or director of a financial service provider has a good faith belief to suspect financial exploitation of an eligible adult occurred, was attempted, or is being attempted, the financial service provider, or an employee, officer, or director of a financial service provider may report the information to a law enforcement agency or the department of health and human services.

2. This section does not impose a duty on a financial institution to investigate a suspected financial exploitation of an eligible adult or to make a report to a law enforcement agency or the department of health and human services.

3. A financial service provider, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability for reporting or not reporting under this section if the determination is made based on a good faith belief that financial exploitation occurred, was attempted, or is being attempted.

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019; 2021, ch. 352, § 6, effective September 1, 2022.

6-08.5-04. Individuals who may be contacted regarding suspected financial exploitation — Immunity — Exemption from customer consent and notice provisions.

  1. A financial service provider may offer to an eligible adult the opportunity to submit and update periodically a list of individuals the eligible adult authorizes the financial service provider to contact if the financial service provider has reasonable cause to suspect the eligible adult is a victim or a target of financial exploitation.
  2. Notwithstanding subsection 1, a financial service provider having a good faith belief to suspect an eligible adult is the victim or target of financial exploitation may convey the suspicion to one or more of the following individuals, provided the individual is not the suspected perpetrator:
    1. An individual on the list described in subsection 1.
    2. A co-owner, additional authorized signatory, or beneficiary on the eligible adult’s account.
    3. An attorney-in-fact, trustee, conservator, guardian, or other fiduciary who has been selected or appointed to manage some or all of the financial affairs of the eligible adult.
  3. If a financial service provider provides information under this section, the financial service provider may limit the information, such as disclosing only that the financial service provider has reasonable cause to suspect the eligible adult may be a victim or target of financial exploitation, without disclosing any other details or confidential personal information regarding the financial affairs of the eligible adult.
  4. The financial service provider may choose not to contact an individual on the list provided under subsection 1, if the financial service provider suspects the individual is engaged in financial exploitation.
  5. The financial service provider may rely on information provided by the eligible adult in compiling a list of contact individuals.
  6. A financial service provider, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability for contacting an individual or electing not to contact an individual under this section and for actions taken in furtherance of that determination if the determination is made based on a good faith belief financial exploitation occurred, was attempted, or is being attempted.
  7. Contact with an individual, and any information provided under this section, is exempt from the customer consent provisions in sections 6-08.1-03 and 6-08.1-04.

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019.

6-08.5-05. Refusal to accept power of attorney — Immunity.

  1. A financial service provider may refuse to accept an acknowledged power of attorney if the financial service provider has a good faith belief to suspect the principal is or may be the victim or target of financial exploitation by the agent or individual acting for or with the agent.
  2. A financial service provider, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability for refusing to accept a power of attorney or for accepting a power of attorney under this section and for actions taken in furtherance of that determination if the determination was based on a good faith belief financial exploitation occurred, was attempted, or was being attempted.

Source: S.L. 2019, ch. 80, § 2, effective August 1, 2019.

CHAPTER 6-09 The Bank of North Dakota

6-09-01. Purpose and establishment of Bank of North Dakota.

For the purpose of encouraging and promoting agriculture, commerce, and industry, the state of North Dakota shall engage in the business of banking, and for that purpose shall maintain a system of banking owned, controlled, and operated by it, under the name of the Bank of North Dakota.

Source: S.L. 1919, ch. 147, § 1; 1925 Supp., § 5192a1; R.C. 1943, § 6-0901.

Cross-References.

Transfer of Bank’s possessory interests in real estate to board of university and school lands, exceptions, see ch. 15-08.1.

Notes to Decisions

Constitutionality.

The Due Process Clause is not violated by the act creating the Bank of North Dakota, on the ground that taxes are imposed for private purposes. Green v. Frazier, 253 U.S. 233, 40 S. Ct. 499, 64 L. Ed. 878, 1920 U.S. LEXIS 1418 (U.S. 1920).

The issuance of bonds and levying of a tax on all nonexempt property in the state to build and operate state-owned industries and utilities do not violate the Fourteenth Amendment. Green v. Frazier, 253 U.S. 233, 40 S. Ct. 499, 64 L. Ed. 878, 1920 U.S. LEXIS 1418 (U.S. 1920).

Federal Capital Stock Tax.

The Bank of North Dakota is subject to the federal capital stock tax. North Dakota v. Olson, 33 F.2d 848, 1929 U.S. App. LEXIS 2832 (8th Cir. N.D. 1929).

Separate Agency of State.

The Bank of North Dakota may function as a separate agency of the sovereign power of the state. Sargent County v. State, 47 N.D. 561, 182 N.W. 270, 1921 N.D. LEXIS 107 (N.D. 1921).

6-09-02. Industrial commission to operate Bank — Business of Bank.

The industrial commission shall operate, manage, and control the Bank of North Dakota, locate and maintain its places of business, of which the principal place must be within the state, and make and enforce orders, rules, regulations, and bylaws for the transaction of its business. The business and financial transactions of the Bank, in addition to other matters specified in this chapter, may include anything that any bank or bank holding company lawfully may do, except as it is restricted by the provisions of this chapter. This provision may not be held in any way to limit or qualify either the powers of the industrial commission granted by or the functions of said Bank as defined in this chapter. The powers of the industrial commission and the functions of the Bank must be implemented through actions taken and policies adopted by the industrial commission.

Source: S.L. 1919, ch. 147, § 2; 1925 Supp., § 5192a2; R.C. 1943, § 6-0902; S.L. 1989, ch. 110, § 2.

Notes to Decisions

Borrowing Money.

This section gives the Bank of North Dakota power to borrow money. Sargent County v. State, 47 N.D. 561, 182 N.W. 270, 1921 N.D. LEXIS 107 (N.D. 1921).

Federal Capital Stock Tax.

The Bank of North Dakota is subject to the federal capital stock tax. North Dakota v. Olson, 33 F.2d 848, 1929 U.S. App. LEXIS 2832 (8th Cir. N.D. 1929).

6-09-02.1. Declaration and finding of public purpose — Bank of North Dakota advisory board of directors.

To enlist the help of private enterprise and to encourage more active use of the purposes for which the Bank of North Dakota was created, the governor shall appoint an advisory board of directors to the Bank of North Dakota consisting of seven persons, at least two of whom must be officers of banks, the majority of the stock of which is owned by North Dakota residents, and at least one of whom must be an officer of a state chartered or federally chartered financial institution. The governor shall appoint a chairman, vice chairman, and secretary from the advisory board of directors. The term of a director is four years. The industrial commission shall define the duties of the advisory board of directors.

Source: S.L. 1989, ch. 110, § 1; 2005, ch. 487, § 1.

6-09-02.2. Authority of the advisory board of directors to the Bank of North Dakota.

The advisory board of directors to the Bank of North Dakota shall:

  1. Meet regularly with the management of the Bank of North Dakota to review the Bank’s operations to determine whether recommendations should be made by the board to the industrial commission relating to improved management performance, better customer service, and overall improvement in internal methods, procedures, and operating policies of the Bank.
  2. Make recommendations to the industrial commission relating to the establishment of additional objectives for the operation of the Bank of North Dakota.
  3. Make recommendations to the industrial commission concerning the appointment of officers of the Bank of North Dakota.
  4. Meet regularly with the industrial commission to present any recommendations concerning the Bank of North Dakota.
  5. In addition to the foregoing and pursuant to authorization from the industrial commission, act on behalf of the Bank with respect to the powers and functions of the Bank.

Source: S.L. 1989, ch. 110, § 1.

6-09-03. Industrial commission may acquire property by purchase or eminent domain — Investment in banking house and furnishings. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-04. Commission to employ president and employees — Compensation, operation, and maintenance expenditures limited to appropriations, revenue, or capital.

The industrial commission shall appoint a president, and may appoint and employ such subordinate officers, employees, and agents as it may judge expedient and in the interests of the state, and shall define the duties, designate the titles, and fix the compensation of all such persons. The commission may designate the president or other officers or employees as its agent in respect to the functions of the Bank, subject to its supervision, limitation, and control. The total compensation of such appointees and employees, together with other expenditures for the operation and maintenance of the Bank, shall remain within the appropriation, revenues, or capital lawfully available for such purposes.

Source: S.L. 1919, ch. 147, § 4; 1925 Supp., § 5192a4; R.C. 1943, § 6-0904; S.L. 1969, ch. 121, § 1; 1979, ch. 137, § 1; 1983, ch. 117, § 1; 1989, ch. 110, § 3.

6-09-05. Removal and discharge of appointees.

The industrial commission may remove and discharge any and all persons appointed in the exercise of the powers granted by this chapter, whether by the commission or by the president of the Bank. All appointments and removals contemplated by this chapter must be made as the commission deems fit to promote the efficiency of the public service.

Source: S.L. 1919, ch. 147, § 5; 1925 Supp., § 5192a5; R.C. 1943, § 6-0905; S.L. 1969, ch. 121, § 2; 1989, ch. 110, § 4.

6-09-06. Capital of Bank. [Repealed]

Repealed by S.L. 1979, ch. 138, § 1.

6-09-07. State funds must be deposited in Bank of North Dakota — Income of the Bank.

All state funds and funds of all state penal, educational, and industrial institutions must be deposited in the Bank of North Dakota by the persons having control of such funds or must be deposited in accordance with constitutional and statutory provisions. All income earned by the Bank for its own account on state moneys that are deposited in or invested with the Bank to the credit of the state must be credited to and become a part of the revenues and income of the Bank.

Source: S.L. 1919, ch. 147, § 7; I.M., November 2, 1920, § 1; S.L. 1921, p. 255; 1925 Supp., § 5192a7; R.C. 1943, § 6-0907; S.L. 1965, ch. 203, § 40; 1991, ch. 578, § 1.

Cross-References.

Money received by public service commission from insolvent grain warehousemen deposited in Bank, see § 60-04-08.

State funds to be deposited in Bank, see § 21-04-02.

State health department authorized to transfer unclaimed fees after three years, see § 23-01-14.

State scholarship revolving fund and special fund for student and other loans, see § 15-62.1-13.

Notes to Decisions

County Funds.

This section does not repeal the power of the county commissioners to designate legal depositories and direct the placing of county funds. State ex rel. Kopriva v. Larson, 48 N.D. 1144, 189 N.W. 626, 1922 N.D. LEXIS 155 (N.D. 1922).

Depositary Bond.

The enactment of this section in 1919 canceled depositary bond previously executed and terminated liability of sureties. City of Dickinson v. Dakota Nat'l Bank, 52 N.D. 204, 202 N.W. 279, 1925 N.D. LEXIS 21 (N.D. 1925).

Bond given by depositary of county funds under ch. 56, Laws 1921 was not terminated by ch. 199, Laws 1923. Golden Valley County v. Lundin, 52 N.D. 420, 203 N.W. 317, 1925 N.D. LEXIS 39 (N.D. 1925).

Duty of State Treasurer.

It is the duty of the state treasurer to deposit all state and state institutional funds which come into his possession in the Bank of North Dakota. State ex rel. Lemke v. District Court, 49 N.D. 27, 186 N.W. 381, 1921 N.D. LEXIS 133 (N.D. 1921).

Industrial Commission Funds.

Funds of the industrial commission cannot be placed legally in any depository except the Bank of North Dakota. State v. Gammons, 64 N.D. 702, 256 N.W. 163, 1934 N.D. LEXIS 255 (N.D. 1934).

6-09-08. Nonliability of officers and sureties after deposit.

Whenever any of the public funds hereinbefore designated are deposited in the Bank of North Dakota, as hereinbefore provided, the official having control thereof and the sureties on the bond of every such official shall be exempt from all liability by reason of loss of any such funds while so deposited.

Source: S.L. 1919, ch. 147, § 8; 1925 Supp., § 5192a8; R.C. 1943, § 6-0908.

6-09-09. Deposits may be received from any source — Deposits to credit in other banks. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-10. Guaranty of deposits — Exemption from all taxation.

All deposits in the Bank of North Dakota are guaranteed by the state. Such deposits are exempt from state, county, and municipal taxes of any and all kinds.

Source: S.L. 1919, ch. 147, § 10; 1925 Supp., § 5192a10; R.C. 1943, § 6-0910.

6-09-11. Bank a clearinghouse.

For banks that make the Bank of North Dakota a reserve depositary, it may perform the functions and render the services of a clearinghouse, including all facilities for providing domestic and foreign exchange, and may rediscount paper, on such terms as the industrial commission shall provide.

Source: S.L. 1919, ch. 147, § 11; 1925 Supp., § 5192a11; R.C. 1943, § 6-0911; S.L. 1989, ch. 110, § 5.

6-09-12. Interest rates fixed by commission — Time deposits — Limitations — Charges for services. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-13. Collection items must be paid to Bank of North Dakota at par — Violation a misdemeanor. [Repealed]

Repealed by S.L. 1975, ch. 106, § 673.

6-09-14. Bank of North Dakota may deposit in any bank. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-15. Powers.

The Bank of North Dakota may:

  1. Make, purchase, guarantee, or hold loans:
    1. To state-chartered or federally chartered lending agencies or institutions or any other financial institutions.
    2. To holders of Bank of North Dakota certificates of deposit and savings accounts up to ninety percent of the value of the certificates and savings accounts offered as security.
    3. To actual farmers who are residents of this state, if the loans are secured by recorded mortgages giving the Bank of North Dakota a first lien on real estate in North Dakota in amounts not to exceed eighty percent of the value of the security.
    4. That are insured or guaranteed in whole or in part by the United States, its agencies, or instrumentalities.
    5. That are eligible to be guaranteed under chapter 15-62.1. Loans made pursuant to this subdivision may provide for interest that remains unpaid at the end of any period specified in the loan to be added to the principal amount of the debt and thereafter accumulate interest.
    6. To individuals or bank holding companies for the purpose of purchasing or refinancing the purchase of bank stock of a bank located in the state.
    7. To nonprofit organizations that are exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code [26 U.S.C. 501(c)(3)], the proceeds of the loans to be used for construction, reconstruction, repair, renovation, maintenance, and associated costs on property under the control of the parks and recreation department.
    8. Under Public Law No. 99-198 [99 Stat. 1534; 7 U.S.C. 1932 et seq.], as amended through December 31, 1996, to nonprofit corporations for the purpose of relending loan funds to rural businesses.
    9. Under title 7, Code of Federal Regulations, part 1948, subpart C; part 1951, subparts F and R; and part 1955, subparts A, B, and C, as amended through December 31, 1996, to finance businesses and community development projects in rural areas.
    10. Obtained as security pledged for or originated in the restructuring of any other loan properly originated or participated in by the Bank.
    11. To instrumentalities of this state.
    12. As otherwise provided by this chapter or other statutes.
    13. If the Bank is participating in the loan and the Bank deems it is in the best interests of the Bank to do so, it may purchase the remaining portion of the loan from a participating lender that is closed by regulatory action or from the receiver of the participating lender’s assets.
    14. To an investment company created for completing a trust preferred securities transaction for the benefit of a financial institution located in this state.
  2. Make agricultural real estate loans in order to participate in the agricultural mortgage secondary market program established pursuant to the Agricultural Credit Act [Pub. L. 100-233; 101 Stat. 1686; 12 U.S.C. 2279aa-2279aa-14], as amended through December 31, 1996.
  3. Purchase participation interests in loans made or held by banks, bank holding companies, state-chartered or federally chartered lending agencies or institutions, any other financial institutions, or any other entity that provides financial services and that meets underwriting standards that are generally accepted by state or federal financial regulatory agencies.
  4. Invest its funds:
    1. In conformity with policies of the industrial commission.
    2. In a public venture capital corporation organized and doing business in this state through the purchase of shares of stock.
    3. In North Dakota alternative and venture capital investments and early-stage capital funds, including the North Dakota development fund, incorporated, not to exceed fifteen million dollars, for the purpose of providing funds for investment in North Dakota alternative and venture capital investments, early-stage capital funds, and entrepreneurship awards. The Bank may invest a maximum of two hundred thousand dollars per biennium in North Dakota-based venture capital entities that make investments in companies located outside North Dakota. The Bank may allow for third-party management of the funds invested under this subdivision if the management is provided by the North Dakota development fund, incorporated, or a third party that is located in the state and that has demonstrated fund management experience.
  5. Buy and sell federal funds.
  6. Lease, assign, sell, exchange, transfer, convey, grant, pledge, or mortgage all real and personal property, title to which has been acquired in any manner.
  7. Acquire real or personal property or property rights by purchase, lease, or, subject to chapter 32-15, the exercise of the right of eminent domain and may construct, remodel, and repair buildings.
  8. Receive deposits from any source and deposit its funds in any bank or other financial institution.
  9. Perform all acts and do all things necessary, convenient, advisable, or desirable to carry out the powers expressly granted or necessarily implied in this chapter through or by means of its president, officers, agents, or employees or by contracts with any person, firm, or corporation.
  10. Purchase mortgage loans on residential real property originated by financial institutions.

Source: S.L. 1919, ch. 147, § 15; 1925 Supp., § 5192a15; R.C. 1943, § 6-0915; I.M. November 2, 1920; S.L. 1921, p. 255; 1925 Supp., 5192a26; R.C. 1943, § 6-0915; S.L. 1967, ch. 91, § 1; 1969, ch. 122, § 1; 1971, ch. 109, § 1; 1973, ch. 71, § 1; 1979, ch. 139, § 1; 1979, ch. 140, § 1; 1981, ch. 121, § 1; 1981, ch. 122, § 1; 1983, ch. 118, § 1; 1983, ch. 119, § 1; 1989, ch. 102, § 2; 1989, ch. 110, § 6; 1991, ch. 590, § 1; 1991, ch. 640, § 1; 1993, ch. 79, § 1; 1993, ch. 80, § 1; 1993, ch. 81, § 1; 1995, ch. 94, §§ 1, 2; 1997, ch. 93, § 1; 1997, ch. 94, §§ 1, 2; 2003, ch. 76, §§ 1, 2; 2003, ch. 77, § 1; 2005, ch. 151, § 1; 2007, ch. 14, § 23; 2007, ch. 87, § 1; 2007, ch. 293 §§ 4, 5; 2009, ch. 102, § 1; 2009, ch. 109, § 1; 2013, ch. 80, § 1.

Notes to Decisions

Loans to Banks and Political Subdivisions.

The Bank of North Dakota may loan money not only to political subdivisions, but also to state and national banks. Sargent County v. State, 47 N.D. 561, 182 N.W. 270, 1921 N.D. LEXIS 107 (N.D. 1921).

Loans to Individuals.

Loans to individuals are prohibited except upon real estate and warehouse receipts. State v. Dakota Nat'l Bank, 52 N.D. 98, 201 N.W. 851, 1924 N.D. LEXIS 109 (N.D. 1924).

Real estate loans to nonresident farmers are prohibited. Hendrickson v. Syverson, 82 N.W.2d 827, 1957 N.D. LEXIS 121 (N.D. 1957).

6-09-15.1. Loans to general fund authorized — Continuing appropriation — Report.

The state treasurer and the director of the office of management and budget may, when the balance in the state general fund is insufficient to meet legislative appropriations, borrow from the Bank of North Dakota in an amount that at no time exceeds the total principal amount of fifty million dollars with principal maturity not to extend beyond the biennium in which the borrowing occurs. As a condition precedent to the loan, the state treasurer must request and obtain a statement from the director of the office of management and budget and state tax commissioner certifying that anticipated general fund revenues for the balance of the biennium in which the loan is taken will exceed the principal amount and interest on the loan. The state industrial commission may in turn direct the Bank of North Dakota to make loans to the state general fund at such rates of interest as the industrial commission may prescribe. The state treasurer and the director of the office of management and budget shall establish a repayment plan for the repayment of the principal upon maturity and the interest when due. The office of management and budget shall report to the budget section of the legislative management regarding any loans obtained pursuant to this section.

Source: S.L. 1965, ch. 92, § 3; 1983, ch. 120, § 1; 2017, ch. 14, § 20, effective July 1, 2017.

6-09-15.2. Bank may invest in certain government sponsored stocks — Limit. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-15.3. Bank stock loans — Requirements. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-15.4. Participations in loans to small business concerns — Direct loans to nonprofit corporations. [Repealed]

Repealed by S.L. 1999, ch. 82, § 1.

6-09-15.5. Bank loans to beginning farmers — Revolving loan fund — Requirements.

  1. A revolving loan fund must be maintained in the Bank of North Dakota for the purpose of making or participating in loans to North Dakota beginning farmers for the purchase of agricultural real estate, equipment, and livestock. All moneys transferred into the fund, interest upon moneys in the fund, and payments to the fund of principal and interest on loans made from the fund are appropriated for the purpose of providing loans and to supplement the interest rate on loans to beginning farmers made by the Bank of North Dakota under subdivision c of subsection 1 of section 6-09-15 and in accordance with this section.
  2. The revolving loan fund and loans made from the fund must be administered and supervised by the Bank of North Dakota. The Bank may deduct a service fee for administering the fund from interest payments received on loans. An application for a loan from the fund must be made to the Bank and, upon approval, a loan must be made from the fund in accordance with this section.
  3. A loan made from the fund may not exceed eighty percent of the appraised value of the agricultural collateral, with the actual percentage to be determined by the Bank. The Bank may do all things and acts and may establish additional terms and conditions necessary to make a loan under this section. A loan made from the fund must have a first security interest.
  4. A loan made from the fund must have either a fixed rate at one percent below the Bank’s then current base for ten years or the interest rate fixed at one percent below the Bank’s then current base rate for the first five years with a maximum rate of six percent per year and variable at one percent below the Bank’s then current base rate for the second five years and during the second five years, the variable rate must be adjusted annually on the anniversary date. The rate during the remaining term of the loan floats at the Bank’s base rate as in effect from time to time.
  5. The maximum term of a real estate loan is thirty years. The maximum term of a farm equipment or livestock loan is seven years.
  6. The industrial commission shall contract with a certified public accounting firm to audit the fund as necessary. The cost of the audit, and any other actual costs incurred by the Bank on behalf of the fund, must be paid for by the fund.
  7. The Bank shall adopt policies to implement this section.
  8. Notwithstanding any other provision of law, the Bank may transfer any unobligated funds between funds that have been appropriated by the legislative assembly for interest buydown in the beginning farmers loan fund and the agriculture partnership in assisting community expansion fund.
  9. Notwithstanding any other provision of law, the Bank may transfer any unobligated funds to the value-added agriculture equity loan program for the purpose of interest buydown on a loan made for investment in a feedlot or dairy operation. Fund transfers under this subsection may not exceed one million dollars during a biennium.

Source: S.L. 1983, ch. 121, §§ 1 to 3; 1985, ch. 135, § 1; 1989, ch. 111, § 1; 1991, ch. 95, § 6; 1993, ch. 79, § 2; 1995, ch. 95, § 1; 2001, ch. 99, § 1; 2003, ch. 78, § 1; 2007, ch. 88, § 1; 2011, ch. 78, § 1; 2019, ch. 81, § 1, effective August 1, 2019.

Cross-References.

Beginning farmer loan guarantee program, see ch. 6-09.8.

6-09-15.6. Bank of North Dakota purchase of export trading company stock — Limitation. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-15.7. Bank may invest in a public venture capital corporation. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-15.8. Bank of North Dakota may make loans for improvement of facilities under the control of the parks and recreation department. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-15.9. Limitations on loans by the Bank of North Dakota — Disclosure of interests in certain loans.

Notwithstanding any other provision of law, the Bank of North Dakota may not make any loan or otherwise give its credit to a member of the industrial commission during the member’s term on the industrial commission. Before taking office, a member of the industrial commission shall file a statement with the Bank of North Dakota indicating any personal interest that that member has in any loan or loan application in existence or pending at any time during the member’s term on the industrial commission.

Source: S.L. 1995, ch. 96, § 1.

6-09-16. Funds transferred to state departments — How credited by state treasurer. [Repealed]

Repealed by S.L. 1979, ch. 142, § 1.

6-09-17. Office of management and budget to issue warrants against transferred funds. [Repealed]

Repealed by S.L. 1979, ch. 142, § 1.

6-09-18. Real estate loans — Application — Appraisal — Action on loans. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-19. Conditions of real estate mortgage — Extension of payments. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-20. Mortgage and note payable to manager of Bank — Recitals — Recording — Satisfaction and discharge. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-21. Sale and assignment of note and mortgage — Extension of payments limited. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-22. Assignment of note and mortgage to state treasurer — Payments — Satisfactions. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-23. Partial release and satisfaction of mortgages assigned to state treasurer. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-24. Partial payments — Sale and assignment of mortgages assigned to state treasurer. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-25. State treasurer may lease lands acquired through foreclosure of Bank mortgages — Oil and gas leases. [Repealed]

Repealed by S.L. 1977, ch. 138, § 12.

6-09-26. Name in which business conducted and titles taken — Execution of instruments.

All business of the Bank must be conducted under the name of “The Bank of North Dakota”. Title to property pertaining to the operation of the Bank must be obtained and conveyed in the name of “The State of North Dakota, doing business as The Bank of North Dakota”. Instruments must be executed in the name of the state of North Dakota. Within the scope of authority granted by the industrial commission, the president may execute instruments on behalf of the Bank, including any instrument granting, conveying, or otherwise affecting any interest in or lien upon real or personal property. Other officers or employees of, and legal counsel to, the Bank may execute instruments on behalf of the Bank when authorized by the industrial commission. Any instrument executed prior to July 11, 1989, by the president, an attorney for the Bank, or an officer or employee of the Bank, and otherwise proper, is valid and effective.

Source: S.L. 1919, ch. 147, § 21; 1925 Supp., § 5192a23; R.C. 1943, § 6-0926; S.L. 1989, ch. 110, § 7; 1991, ch. 95, § 6.

6-09-26.1. Execution of instruments. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-27. Civil actions on Bank transactions — Name of parties — Service — Venue.

  1. Civil actions may be brought against the state of North Dakota on account of claims for relief claimed to have arisen out of transactions connected with the operation of the Bank of North Dakota upon condition that the provisions of this section are complied with. In such actions, the state must be designated as “The State of North Dakota, doing business as The Bank of North Dakota”. The actions may be brought in the same manner and are subject to the same provisions of law as other civil actions. The action must be brought in Burleigh County except as provided in section 28-04-01 or except as provided in subsection 2.
  2. If the Bank seeks to participate in a loan that involves multiple banks and if the loan documents require the Bank to agree that civil actions will be commenced in a state outside of North Dakota, the Bank may agree to venue outside of North Dakota if approved by the attorney general.

Source: S.L. 1919, ch. 147, § 22; 1925 Supp., § 5192a24; R.C. 1943, § 6-0927; S.L. 1969, ch. 121, § 3; 1981, ch. 91, § 2; 1985, ch. 82, § 7; 1989, ch. 110, § 8; 2011, ch. 85, § 1.

Notes to Decisions

Garnishment.

Garnishment proceedings may be maintained by the county against various state and national banks to recover redeposits made by the Bank of North Dakota. Sargent County v. State, 47 N.D. 561, 182 N.W. 270, 1921 N.D. LEXIS 107 (N.D. 1921).

Venue of Action.

Action against the Bank of North Dakota, agent for the state treasurer as trustee for the state, to have taxes assessed against certain land adjudged to be valid liens, was properly brought in the county in which the land was located. Cavalier County v. Gestson, 75 N.D. 657, 31 N.W.2d 787, 1948 N.D. LEXIS 91, 1948 N.D. LEXIS 92 (N.D. 1948).

Law Reviews.

Counterclaims and Third-Party Practice under the North Dakota Rules, 34 N.D. L. Rev. 7 (1958).

Sovereign Immunity — Judicial Abrogation of North Dakota’s Sovereign Immunity Results in Its Possible Legislative Reassertion and Legislation to Provide Injured Parties with a Remedy for the Torts Committed by the State or Its Agents, 71 N.D. L. Rev. 761 (1995).

6-09-28. Surety on appeal, attachment, claim and delivery, and other cases in which undertaking required, not required of Bank of North Dakota.

Provisions of law requiring that a surety or sureties be given on undertakings in actions on appeal, attachment, claim and delivery, and other cases in which an undertaking is required, are not applicable to the state of North Dakota, doing business as the Bank of North Dakota, as the party seeking such relief. It is required to give its own undertaking without surety and to reimburse the adverse party when required by law.

Source: S.L. 1929, ch. 90, § 1; R.C. 1943, § 6-0928.

6-09-29. Examinations and audit reports.

The state auditor shall contract with an independent certified public accounting firm for an annual audit of the Bank of North Dakota in accordance with generally accepted government auditing standards. The state auditor shall audit annually or contract for an annual audit of the separate programs and funds administered by the Bank of North Dakota. On request of the state auditor, the industrial commission shall assist the state auditor in the auditing firm selection process, but the selection of the auditing firm is the state auditor’s responsibility. The auditor selected shall prepare an audit report that includes financial statements presented in accordance with the audit and accounting guide for banks and savings institutions issued by the American institute of certified public accountants. The auditor also shall prepare audited financial statements for inclusion in the comprehensive annual financial report for the state. The state auditor may conduct performance audits of the Bank of North Dakota, including the separate programs and funds administered by the Bank. The auditor shall report the results of the audit to the industrial commission and to the legislative assembly. The Bank of North Dakota or its separate programs and funds shall pay the costs of the audit. The department of financial institutions, through the commissioner, shall examine the Bank of North Dakota at least once each twenty-four months and conduct any investigation of the Bank which may be necessary. The commissioner shall report the examination results, and the results of any necessary investigation, to the industrial commission as soon as practicable and to the legislative assembly. The department of financial institutions shall charge a fee for any examination or investigation at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the examinations and investigations provided for by this section.

Source: S.L. 1919, ch. 147, § 23; 1925 Supp., § 5192a25; R.C. 1943, § 6-0929; S.L. 1947, ch. 109, § 1; 1957 Supp., § 6-0929; S.L. 1965, ch. 82, § 2; 1971, ch. 111, § 1; 1973, ch. 72, § 1; 1979, ch. 143, § 1; 1983, ch. 110, § 6; 1985, ch. 115, § 2; 1987, ch. 10, § 6; 1997, ch. 95, § 1; 2001, ch. 88, § 28.

Notes to Decisions

Examination.

It is not a duty of the state auditor to examine the Bank of North Dakota. State ex rel. Kozitzky v. Waters, 45 N.D. 115, 176 N.W. 913, 1920 N.D. LEXIS 111 (N.D. 1920).

The authority to examine the books of the state bank has been conferred upon the state examiner. Sargent County v. State, 47 N.D. 561, 182 N.W. 270, 1921 N.D. LEXIS 107 (N.D. 1921).

6-09-30. Repayment of moneys appropriated for Bank to state. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-31. Sale of land held by state treasurer as trustee for state. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-32. Bank may adopt rules governing sales. [Repealed]

Repealed by S.L. 1967, ch. 91, § 2.

6-09-33. Bank of North Dakota to administer assets of rural rehabilitation corporation. [Repealed]

Repealed by S.L. 1989, ch. 110, § 11.

6-09-34. Electronic fund transfer systems.

The Bank of North Dakota may establish, under such rules and regulations as adopted by the industrial commission, a system to provide fund transfer services to its customers and to the customers of state-chartered and federally chartered banks located within the state of North Dakota, and to other financial institutions otherwise authorized to utilize the services of electronic fund transfer systems, to acquire such equipment as is necessary to establish electronic fund transfer systems, and to make such reasonable charges for services rendered to other banks hereunder as may be established by the industrial commission.

Source: S.L. 1975, ch. 78, § 1.

6-09-35. Confidentiality of Bank records.

The following records of the Bank of North Dakota are confidential:

  1. Commercial or financial information of a customer, whether obtained directly or indirectly, except for routine credit inquiries or unless required by due legal process. As used in this subsection, “customer” means any person who has transacted or is transacting business with, or has used or is using the services of, the Bank of North Dakota, or for whom the Bank of North Dakota has acted as a fiduciary with respect to trust property.
  2. Internal or interagency memorandums or letters which would not be available by law to a party other than in litigation with the Bank.
  3. Information contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of a state or federal agency responsible for the regulation or supervision of any Bank activity.
  4. Information obtained from the state department of financial institutions which would not be available from that agency under section 6-01-07.1.
  5. The report by a Bank officer or member of the Bank’s advisory board of directors concerning personal financial statements.

Source: S.L. 1981, ch. 125, § 1; 1985, ch. 131, § 1; 2001, ch. 88, § 29; 2001, ch. 393, § 1.

Collateral References.

Search and seizure of bank records pertaining to customer as violation of customer’s rights under state law, 33 A.L.R.5th 453.

6-09-36. Bank of North Dakota — Custodian of securities.

Notwithstanding any other provision of law to the contrary, the Bank of North Dakota shall replace the state treasurer as the custodian of all securities that are required to be deposited with the state except that the state treasurer is the custodian of all securities resulting from the investment of funds by the state treasurer, or except as otherwise required by this section and sections 6-05-04, 6-05-05, 6-05-27, 39-16-10, and 39-16.1-15, subsection 1 of section 39-16.1-17, and subsection 1 of section 39-16.1-19.

Source: S.L. 1989, ch. 113, § 1; 2007, ch. 78, § 5.

6-09-37. Sale and leasing of acquired agricultural real estate.

The sale and leasing of agricultural real estate with an appraised value of ten thousand dollars or more acquired by the Bank of North Dakota through foreclosure or deed in lieu of foreclosure must be done in accordance with chapter 15-07 or 15-09 and policies adopted by the industrial commission. The sale and leasing of agricultural real estate with an appraised value of less than ten thousand dollars, acquired by the Bank of North Dakota through foreclosure or deed in lieu of foreclosure, may be done in a manner as the Bank determines is appropriate given the circumstances. In the case of a lease by the party holding the right of redemption, that party has the right to purchase at any time.

Source: S.L. 1989, ch. 114, § 1; 1999, ch. 83, § 1; 2001, ch. 100, § 1.

6-09-38. North Dakota higher education savings plan — Administration — Rules — Continuing appropriation.

The Bank of North Dakota shall adopt rules to administer, manage, promote, and market a North Dakota higher education savings plan. The Bank shall ensure that the North Dakota higher education savings plan is maintained in compliance with internal revenue service standards for qualified state tuition programs. The Bank, as trustee of the North Dakota higher education savings plan, may impose an annual administrative fee to recover expenses incurred in connection with operation of the plan, support the functions of the Bank related to the educational mission of the Bank, or defray the expenses of education as defined by section 529 of the Internal Revenue Code of 1986 [26 U.S.C. 529]. Administrative fees received by the Bank are appropriated on a continuing basis to be used as provided in this section. Contributions made during the taxable year to a higher education savings plan administered by the Bank, pursuant to the provisions of the plan, are eligible for an income tax deduction as provided in chapter 57-38. Information related to contributions is confidential except as is needed by the tax commissioner for determining compliance with the income tax deduction provided in chapter 57-38.

Source: S.L. 1999, ch. 84, § 1; 2007, ch. 89, § 1; 2019, ch. 82, § 1, effective March 21, 2019.

6-09-38.1. North Dakota achieving a better life experience plan — Administration — Rules — Continuing appropriation.

The Bank of North Dakota shall adopt rules to administer, manage, promote, and market the North Dakota achieving a better life experience plan. The Bank shall ensure the North Dakota achieving a better life experience plan is maintained in compliance with internal revenue service standards for qualified state disability expense programs. The Bank, as trustee of the North Dakota achieving a better life experience plan, may impose an annual administrative fee to recover expenses incurred in connection with operation of the plan. Administrative fees received by the Bank are appropriated to the Bank on a continuing basis to be used as provided under this section. Money and assets in North Dakota achieving a better life experience plan accounts or in qualified achieving a better life experience plan accounts in any state may not be considered for the purpose of determining eligibility to receive, or the amount of, any assistance or benefits from local or state means-tested programs.

History. S.L. 2015, ch. 81, § 1, effective July 1, 2015; 2017, ch. 76, § 1, effective August 1, 2017.

6-09-39. Truckdriver training programs — Loans to students. [Expired]

Expired under S.L. 2003, ch. 79, § 2.

6-09-40. Reimbursement of Bank losses. [Repealed]

Repealed by S.L. 2007, ch. 87, § 2.

6-09-41. Livestock loan guarantee program — Establishment — Rules. [Expired]

Expired under S.L. 2005, ch. 57, § 5.

6-09-42. Health information technology loan fund — Appropriation. [Repealed]

Source: S.L. 2009, ch. 519, § 1; repealed by 2015, ch. 427, § 6, effective August 1, 2015.

6-09-43. Health information technology planning loan fund — Appropriation.

  1. The health information technology planning loan fund is established in the Bank for the purpose of providing low-interest loans to health care entities to assist those entities in improving health information technology infrastructure. This fund is a revolving loan fund. All moneys transferred into the fund, interest upon moneys in the fund, and collections of interest and principal on loans made from the fund are appropriated for disbursement according to this section.
  2. The Bank shall make loans from this fund to health care entities as approved by the health information technology office director, in collaboration with the health information technology advisory committee, in accordance with the criteria established by the health information technology director under section 54-59-26.
  3. The Bank shall administer the health information technology planning loan fund. Funds in the loan fund may be used for loans as provided under this section and the costs of administration of the fund. Annually, the Bank may deduct a service fee for administering the revolving loan fund maintained under this section.
  4. An application for a loan under this section must be made to the health information technology office. The health information technology office director, in collaboration with the health information technology advisory committee, may approve the application of a qualified applicant that meets the criteria established by the health information technology office director. The health information technology office shall forward approved applications to the Bank. Upon approval of the application by the Bank, the Bank shall make the loan from the revolving loan fund as provided under this section.
  5. The Bank may do all acts necessary to negotiate loans and preserve security as deemed necessary, to exercise any right of redemption, and to bring suit in order to collect interest and principal due the revolving loan fund under mortgages, contracts, and notes executed to obtain loans under this section. If the applicant’s plan for financing provides for a loan of funds from sources other than the state of North Dakota, the Bank may make a loan subordinate security interest. The Bank may recover from the revolving loan fund amounts actually expended by the Bank for legal fees and to effect a redemption.

Source: S.L. 2009, ch. 519, § 2.

Effective Date.

This section became effective May 19, 2009, pursuant to an emergency clause in section 12 of chapter 519, S.L. 2009.

6-09-44. Residential mortgages.

  1. The Bank may establish a residential mortgage loan program under which the Bank may originate residential mortgages if private sector mortgage loan services are not reasonably available. Under this program a local financial institution or credit union may assist the Bank in taking a loan application, gathering required documents, ordering required legal documents, and maintaining contact with the borrower.
  2. If the Bank establishes a program under this section, at a minimum the program must provide:
    1. An applicant must be referred to the Bank by a local financial institution or credit union;
    2. The loan application must be for an owner-occupied primary residence; and
    3. The Bank provide all regulatory disclosures, process and underwrite the loan, prepare closing documents, and disburse the loan.
  3. The Bank may sell eligible first-time home buyer loans to the North Dakota housing finance agency.

Source: S.L. 2011, ch. 79, § 1; 2013, ch. 81, § 1; 2019, ch. 83, § 1, effective August 1, 2019.

6-09-45. Required transfer — Special education contract costs. [Repealed]

Source: S.L. 2011, ch. 147, § 1; repealed by 2017, ch. 12, § 26, effective July 1, 2017.

6-09-46. Rebuilders loan program — Loan fund — Continuing appropriation — Requirements. [Repealed]

Source: S.L. 2011 Sp., ch. 579, § 1; 2013, ch. 82, § 1; 2013, ch. 83, § 1; repealed by 2021, ch. 79, § 2, effective July 1, 2021.

6-09-46.1 Rebuilders home loan program — Rebuilders home loan fund — Continuing appropriation — Requirements. [Repealed]

Source: S.L. 2019, ch. 14, § 20, effective May 2, 2019; repealed by 2021, ch. 79, § 2, effective July 1, 2021.

6-09-46.2. Rebuilders loan program — Rebuilders permanent loan fund — Continuing appropriation.

  1. The Bank of North Dakota shall develop a rebuilders loan program to make or participate in loans to North Dakota residents affected by extraordinary losses as a result of a presidentially declared disaster or governor-declared disaster or emergency in the state. Under the rebuilders loan program the Bank shall develop and implement specific loan programs to respond to the specific needs resulting from a disaster or emergency. The Bank may fund the loan from any available funding in the rebuilders permanent loan fund and may accept private sector donations and funds from the federal government.
  2. Upon request of the Bank of North Dakota, the governor shall furnish the Bank with information relating to the nature and amount of state and local resources that have been or will be committed to alleviating the results of the disaster or emergency, an estimate of the amount and severity of the damage and the impact on the private and public sectors, and an estimate of the type and amount of assistance needed.
  3. To apply for a loan under the program, a person shall apply to the originating financial institution. Upon Bank of North Dakota approval of an application, the Bank shall make a loan in accordance with the loan program established under this section. The Bank shall establish a loan application period, which may not exceed a period of eighteen months from the date of the declaration of the disaster or emergency.
  4. Excluding the rebuilders and rebuilders home loans transferred to the fund, the Bank of North Dakota shall deposit in the fund all principal and interest paid on the loans made from the fund. The Bank may deduct from interest payments received on a loan under the program a service fee for administering the fund for the Bank and the originating financial institution. The Bank shall contract with a certified public accounting firm to audit the fund as necessary. The cost of the audit, and any other actual costs incurred by the Bank on behalf of the fund, must be paid by the fund.
  5. There is created in the state treasury the rebuilders permanent loan fund administered by the Bank of North Dakota. The fund consists of all moneys transferred to the fund by the legislative assembly, interest on moneys in the fund, and payments to the fund of principal and interest on loans made from the fund. All moneys in the fund are appropriated to the Bank on a continuing basis for the rebuilders loan program.
  6. If approved by the industrial commission, the fund may borrow from the Bank of North Dakota to provide funding for loans under this section. A loan made to the fund by the Bank must be repaid with principal and interest payment received by the rebuilders permanent loan fund or with moneys appropriated by the legislative assembly.
  7. The Bank of North Dakota shall adopt policies to implement this section.

Source: S.L. 2021, ch. 79, § 1, effective July 1, 2021.

6-09-47. Medical facility infrastructure loan fund — Continuing appropriation — Audit and costs of administration.

  1. The Bank of North Dakota shall administer a loan program to provide loans to medical facilities to conduct construction that improves the health care infrastructure in the state or improves access to existing nonprofit health care providers in the state. The construction project may include land purchases and may include purchase, lease, erection, or improvement of any structure or facility to the extent the governing board of the health care facility has the authority to authorize such activity.
  2. In order to be eligible under this loan program, the applicant must be the governing board of the health care facility which shall submit an application to the Bank. The application must:
    1. Detail the proposed construction project, which must be a project of at least one million dollars and which is expected to be utilized for at least thirty years;
    2. Demonstrate the need and long-term viability of the construction project; and
    3. Include financial information as the Bank may determine appropriate to determine eligibility, such as whether there are alternative financing methods.
  3. A loan provided under this section:
    1. May not exceed the lesser of fifteen million dollars or seventy-five percent of the actual cost of the project;
    2. Must have an interest rate equal to one percent; and
    3. Must provide a repayment schedule of no longer than twenty-five years.
  4. A recipient of a loan under this section shall complete the financed construction project within twenty-four months of approval of the loan. Failure to comply with this subsection may result in forfeiture of the entire loan received under this section.
  5. The medical facility infrastructure fund is a special fund in the state treasury. This fund is a revolving fund. All moneys transferred into the medical facility infrastructure fund, interest on moneys in the fund, and collections of principal and interest on loans from the fund are appropriated to the Bank on a continuing basis for the purpose of providing loans under this section.
  6. Funds in the medical facility infrastructure fund may be used for loans as provided under this section and to pay the costs of administration of the fund. Annually, the Bank may deduct a service fee for administering the medical facility infrastructure fund maintained under this section.
  7. The medical facility infrastructure fund must be audited in accordance with section 6-09-29. The cost of the audit and any other actual costs incurred by the Bank on behalf of the fund must be paid from the fund.
  8. The Bank shall deposit loan repayment funds in the medical facility infrastructure fund.

Source: S.L. 2013, ch. 84, § 1; 2015, ch. 46, § 10, effective July 1, 2015; 2019, ch. 84, § 1, effective March 22, 2019.

6-09-48. Funds received in relation to federal student loan program — Administration — Continuing appropriation.

  1. The Bank of North Dakota shall administer and manage the funds received in relation to the federal student loan program under section 2212 of the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152].
  2. The funds must be used to support the functions of the Bank related to the educational mission of the Bank.
  3. The funds received by the Bank under subsection 1 are appropriated on a continuing basis to be used as provided in this section.
  4. These funds are not subject to section 54-44.1-11.

Source: S.L. 2013, ch. 85, § 1; 2019, ch. 82, § 2, effective March 21, 2019.

6-09-49. Infrastructure revolving loan fund — Continuing appropriation.

  1. The infrastructure revolving loan fund is a special fund in the state treasury from which the Bank of North Dakota shall provide loans to political subdivisions, the Garrison Diversion Conservancy District, and the Lake Agassiz water authority for essential infrastructure projects. The Bank shall administer the infrastructure revolving loan fund. The maximum term of a loan made under this section is the lesser of thirty years or the useful life of the project. A loan made from the fund under this section must have an interest rate that does not exceed two percent per year.
  2. For purposes of this section, “essential infrastructure projects” means capital construction projects to construct new infrastructure or replace existing infrastructure, which provide the fixed installations necessary for the function of a political subdivision. Capital construction projects exclude routine maintenance and repair projects, but include the following:
    1. The Red River valley water supply project;
    2. Water treatment plants;
    3. Wastewater treatment plants;
    4. Sewerlines and waterlines, including lift stations and pumping systems;
    5. Storm water infrastructure, including curb and gutter construction;
    6. Water storage systems, including dams, water tanks, and water towers;
    7. Road and bridge infrastructure, including paved and unpaved roads and bridges;
    8. Airport infrastructure;
    9. Electricity transmission infrastructure;
    10. Natural gas transmission infrastructure;
    11. Communications infrastructure;
    12. Emergency services facilities, excluding hospitals; and
    13. Critical political subdivision buildings and infrastructure.
  3. In processing political subdivision loan applications under this section, the Bank shall calculate the maximum outstanding loan amount per qualified applicant. A qualified applicant under this section may have a maximum combined total of forty million dollars in outstanding loans under this section and section 6-09-49.1. The Bank shall consider the applicant’s ability to repay the loan when processing the application and shall issue loans only to applicants that provide reasonable assurance of sufficient future income to repay the loan.
  4. The Bank shall deposit in the infrastructure revolving loan fund all payments of interest and principal paid under loans made from the infrastructure revolving loan fund. The Bank may use a portion of the interest paid on the outstanding loans as a servicing fee to pay for administrative costs which may not exceed one-half of one percent of the amount of the interest payment. All moneys transferred to the fund, interest upon moneys in the fund, and payments to the fund of principal and interest are appropriated to the Bank on a continuing basis for administrative costs and for loan disbursement according to this section.
  5. The Bank may adopt policies and establish guidelines to administer this loan program in accordance with the provisions of this section and to supplement and leverage the funds in the infrastructure revolving loan fund. Additionally, the Bank may adopt policies allowing participation by local financial institutions.
  6. If a political subdivision applies for a loan under this section for a county road or bridge project, the department of transportation shall review and approve the project before the Bank may issue a loan. If a political subdivision applies for a loan under this section for a water-related project, the state water commission shall review and approve the project before the Bank may issue a loan. The department of transportation and state water commission may develop policies for reviewing and approving projects under this section.

History. S.L. 2015, ch. 82, § 1, effective July 1, 2015; 2017, ch. 77, § 1, effective March 22, 2017; 2019, ch. 40, § 17, effective July 1, 2019; 2021, ch. 42, §§ 16, 17, effective July 1, 2021; 2021, ch. 80, § 1, effective July 1, 2021.

Note.

Section 06-09-49 was amended 3 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 1 of Chapter 80, Session Laws 2021, House Bill 1431; Section 16 of Chapter 42, Session Laws 2021, Senate Bill 2014; and Section 17 of Chapter 42, Session Laws 2021, Senate Bill 2014.

6-09-49.1. Legacy infrastructure loan fund — Continuing appropriation.

  1. The legacy infrastructure loan fund is a special fund in the state treasury from which the Bank of North Dakota shall provide loans to political subdivisions, the Garrison Diversion Conservancy District, and the Lake Agassiz water authority for eligible infrastructure projects as authorized in this section.
  2. The Bank of North Dakota may adopt policies and establish guidelines to administer the legacy infrastructure loan fund in accordance with this section.
  3. A loan made from the legacy infrastructure loan fund must have an interest rate that does not exceed two percent per year. The maximum term of a loan under this section is the lesser of thirty years or the useful life of the project.
  4. The Bank of North Dakota shall transfer all payments of principal and interest paid on loans made from the legacy infrastructure loan fund to the legacy fund. The Bank may use a portion of the interest paid on the outstanding loans as a servicing fee to pay for administrative costs, which may not exceed one-half of one percent of the amount of the outstanding loans.
  5. An applicant shall issue an evidence of indebtedness as authorized by law.
  6. When processing political subdivision loan applications under this section, the Bank of North Dakota shall calculate the maximum outstanding loan amount per qualified applicant. The maximum outstanding loan amount for infrastructure projects under subsection 7 is forty million dollars. The Bank shall consider the ability of the applicant to repay the loan while processing the application and shall issue loans only to applicants that provide reasonable assurance of sufficient future income to repay the loan.
  7. Eligible infrastructure projects under this subsection are capital projects to construct new infrastructure or to replace infrastructure and which provide the fixed installations necessary for the function of a political subdivision. Capital construction projects exclude routine maintenance and repair projects, but include:
    1. Water treatment plants;
    2. Wastewater treatment plants;
    3. Sewerlines and waterlines, including lift stations and pumping stations;
    4. Water storage systems, including dams, water tanks, and water towers;
    5. Storm water infrastructure, including curb and gutter construction;
    6. Road and bridge infrastructure, including paved and unpaved roads and bridges;
    7. Airport infrastructure;
    8. Electricity transmission infrastructure;
    9. Natural gas transmission infrastructure;
    10. Communications infrastructure;
    11. Emergency services facilities, excluding hospitals;
    12. Essential political subdivision building and infrastructure; and
    13. The Red River valley water supply project.
  8. The department of transportation shall approve county road and bridge projects for purposes of loans under this section and may adopt policies for the review and approval of projects under this section.
  9. For purposes of loans under this subsection, the state water commission shall review and approve eligible projects to construct new water-related infrastructure or to replace existing water-related infrastructure which provide the fixed installations necessary for the function of a political subdivision. The state water commission may adopt policies for the review and approval of projects under this section. Capital construction projects exclude routine maintenance and repair projects, but include:
    1. Flood control;
    2. Conveyance projects;
    3. Rural water supply;
    4. Water supply; and
    5. General water management.

Source: S.L. 2021, ch. 81, § 1, effective July 1, 2021.

6-09-49.2. Water infrastructure revolving loan fund — State water commission — Continuing appropriation.

  1. There is created in the state treasury the water infrastructure revolving loan fund to provide loans for water supply, flood protection, or other water development and water management projects. The fund consists of moneys transferred into the fund, interest earned on moneys in the fund, and principal and interest payments to the fund. All moneys in the fund are appropriated to the Bank of North Dakota on a continuing basis for loan disbursements and administrative costs.
  2. The state water commission shall approve eligible projects for loans from the water infrastructure loan fund. The state water commission shall consider the following when evaluating eligible projects:
    1. A description of the nature and purposes of the proposed infrastructure project, including an explanation of the need for the project, the reasons why the project is in the public interest, and the overall economic impact of the project.
    2. The estimated cost of the project, the amount of loan funding requested, and other proposed sources of funding.
    3. The extent to which completion of the project will provide a benefit to the state or regions within the state.
  3. Projects not eligible for the state revolving funds under chapters 61-28.1 and 61-28.2 must be given priority for loans from the water infrastructure revolving loan fund.
  4. In consultation with the state water commission, the Bank of North Dakota shall develop policies for the review and approval of loans under this section. Loans made under this section must be made at the same interest rate as the revolving loan funds established under chapters 61-28.1 and 61-28.2.
  5. The Bank of North Dakota shall manage and administer loans from the water infrastructure loan fund. The Bank shall deposit in the fund all principal and interest paid on loans made from the fund. Annually, the Bank may deduct one-half of one percent of the outstanding loan balance as a service fee for administering the water infrastructure revolving loan fund. The Bank shall contract with a certified public accounting firm to audit the fund. The cost of the audit must be paid from the fund.

Source: S.L. 2021, ch. 42, § 18, effective July 1, 2021; 2021, ch. 80, § 2, effective July 1, 2021.

Note.

Section 06-09-49.2 was amended 2 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 2 of Chapter 80, Session Laws 2021, House Bill 1431; and Section 18 of Chapter 42, Session Laws 2021, Senate Bill 2014.

6-09-50. North Dakota financial center — Lease rates — Payments in lieu of taxes.

The North Dakota financial center is a building that is owned by the Bank of North Dakota and is adjacent to the building in which the Bank of North Dakota is housed. The Bank of North Dakota shall lease the space in the North Dakota financial center to other state agencies based on market rate lease prices. The Bank of North Dakota shall make payments in lieu of property taxes in the manner and according to the conditions and procedures that would apply if the building were privately owned.

History. S.L. 2015, ch. 14, § 16.

6-09-51. Dynamic fiscal impact analysis. [Expired]

Source: S.L. 2017, ch. 364, § 1, effective August 1, 2017; expired by 2017, ch. 364, § 3, effective July 1, 2019.

CHAPTER 6-09.1 Utilization of Bank in Industrial Development [Repealed]

[Repealed by S.L. 1981, ch. 127, § 1; S.L. 1989, ch. 110, § 11]

CHAPTER 6-09.2 Industrial Revenue Bond Guarantee Program [Repealed]

[Repealed by S.L. 1995, ch. 107, § 15]

CHAPTER 6-09.3 Irrigation Development Debentures [Repealed]

[Repealed by S.L. 1985, ch. 575, § 1]

CHAPTER 6-09.4 Public Finance Authority

6-09.4-01. Title.

This chapter must be known as the “North Dakota Public Finance Authority Act”.

Source: S.L. 1975, ch. 80, § 1; 2005, ch. 89, § 1.

6-09.4-02. Legislative policy.

It is declared to be the policy of the state of North Dakota to foster and promote the provision of adequate capital markets and facilities for borrowing money by political subdivisions or other contracting parties and for the financing of their respective public improvements or projects as those terms are used or defined in this chapter or chapter 40-57. It is in the public interest to encourage political subdivisions or other contracting parties to continue their independent undertakings of public improvements or projects and the financing thereof by making funds available at reduced interest costs, especially during periods of restricted credit or money supply. Current credit and municipal bond market conditions require the exercise of the powers of the state to further and implement such policies by authorizing a state instrumentality to be created to borrow money and to issue its bonds to make funds available at reduced rates and on favorable terms for borrowing by political subdivisions or other contracting parties through the purchase or holding of marketable municipal securities of political subdivisions or other contracting parties in fully marketable form or in another form adequate to secure bonds issued by the state instrumentality and by granting broad powers to accomplish and to carry out the policies of the state.

Source: S.L. 1975, ch. 80, § 2; 1981, ch. 417, § 1; 2005, ch. 90, § 1.

6-09.4-03. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Bondholder” or “holder” or any similar term when used with reference to a bond of the public finance authority means any person who is the bearer of any outstanding bond of the public finance authority.
  2. “Bonds” or “bond” means evidences of indebtedness of the public finance authority issued pursuant to this chapter.
  3. “Fully marketable form” means a municipal security duly executed and accompanied by an approving legal opinion of a counsel whose opinions are generally accepted by the public finance authority or other purchasers of municipal securities.
  4. “Municipal security” means an evidence of indebtedness issued by a political subdivision, including a clean renewable energy bond issued under 26 U.S.C. 54 [Pub. L. 109-58; 119 Stat. 991], and a revenue agreement entered into by a contracting party as those terms are used in chapter 40-57, but does not generally include an evidence of indebtedness issued pursuant to chapter 40-57 other than an evidence of indebtedness that qualifies as a qualified small issue bond as defined under 26 U.S.C. 144(a) [Pub. L. 99-514; 100 Stat. 2606], as amended, and regulations promulgated and officially proposed to be promulgated thereunder, or as an “exempt facility bond” as defined under 26 U.S.C. 142(a)(4), (5), or (6) [Pub. L. 99-514; 100 Stat. 2606], as amended, and regulations promulgated and officially proposed to be promulgated thereunder, issued to provide one of the following:
    1. A facility for the furnishing of water.
    2. A wastewater facility.
    3. A solid waste disposal facility.
  5. “Political subdivision” means:
    1. A local governmental unit created by statute or by the Constitution of North Dakota for local governmental or other public purposes.
    2. The department of environmental quality, or any other state agency or authority, or any member-owned association or publicly owned and nonprofit corporation:
      1. Operating any public water system that is subject to chapter 61-28.1.
      2. Operating any facility, system, or other related activity that is eligible for financial assistance under chapter 61-28.2.
    3. The Bank of North Dakota for purposes of the revolving loan fund program established by chapter 61-28.2.
    4. The state water commission for purposes of the revolving loan fund program established by chapter 61-28.1.
    5. A qualified borrower within the meaning of 26 U.S.C. 54(j)(5) [Pub. L. 109-58; 119 Stat. 995].
    6. The Garrison Diversion Conservancy District or any successor entity or improvement district created under chapter 61-24.8 to finance or refinance irrigation and water supply projects.
    7. The Lake Agassiz water authority, for use in financing the construction, acquisition, extension, expansion, alteration, betterment, maintenance, or renovation of a project under section 61-39-16.
  6. “Public finance authority” means the public finance authority created by section 6-09.4-04.
  7. “Required debt service reserve” means the amount required to be on deposit in the reserve fund.
  8. “Reserve fund” means the public finance authority reserve fund or funds created as provided in section 6-09.4-10.
  9. “Revenues” means any or all fees, charges, moneys, profits, payments of principal of or interest on municipal securities, investment income, revenues, appropriations, and all other income derived or to be derived by the public finance authority under this chapter.

Source: S.L. 1975, ch. 80, § 3; 1981, ch. 417, § 2; 1985, ch. 132, § 1; 1989, ch. 115, § 1; 1995, ch. 97, §§ 1, 2; 1999, ch. 85, § 1; 2005, ch. 89, § 2; 2005, ch. 90, § 2; 2007, ch. 91, § 1; 2017, ch. 424, § 1, effective April 19, 2017; 2017, ch. 199, § 3, effective April 29, 2019.

6-09.4-04. Creation of public finance authority.

A public finance authority is established under the operation, management, and control of the industrial commission to be known as the “public finance authority”. The public finance authority is constituted as an instrumentality of the state exercising public and governmental functions, and the exercise by the public finance authority of the powers conferred by this chapter must be deemed and held to be an essential governmental function of the state.

Source: S.L. 1975, ch. 80, § 4; 1987, ch. 129, § 1; 2005, ch. 89, § 3.

6-09.4-05. Participation voluntary — Agreement to participate.

Participation by a political subdivision is entirely voluntary and no political subdivision may be required to sell its bond issues to the public finance authority. Notwithstanding any other state law applicable to the issuance of bonds, a political subdivision desiring to participate in the public finance authority may enter into an agreement with the public finance authority for the purchase by the public finance authority of a bond issue or issues of the political subdivision, including the purchase by the public finance authority of an issue or issues of refunding bonds, which refunding bonds may be required by the agreement to be issued at a rate or rates of interest higher or lower than that of the bond issue or issues to be refunded.

Source: S.L. 1975, ch. 80, § 5; 1983, ch. 123, § 1; 2005, ch. 89, § 4.

6-09.4-05.1. Administrative agreements with state agencies.

The public finance authority and any state agency authorized by state or federal law to make an allocation of bonds or bonding authority or to make loans, or to issue bonds to obtain funds for the purpose of making loans or grants, may enter into an administrative agreement, which may authorize the public finance authority to administer the loan or bond program for the state agency. The agreement may delegate to the public finance authority the authority to make loans, or to issue bonds to obtain funds for the purpose of making loans or grants.

Source: S.L. 2001, ch. 101, § 1; 2005, ch. 89, § 5; 2021, ch. 42, § 19, effective July 1, 2021.

6-09.4-06. Lending and borrowing powers generally.

  1. The public finance authority may lend money to political subdivisions or other contracting parties through the purchase or holding of municipal securities which, in the opinion of the attorney general, are properly eligible for purchase or holding by the public finance authority under this chapter or chapter 40-57 and for purposes of the public finance authority’s capital financing program the principal amount of any one issue does not exceed five hundred thousand dollars. However, the public finance authority may lend money to political subdivisions through the purchase of securities issued by the political subdivisions through the capital financing program without regard to the principal amount of the bonds issued, if the industrial commission approves a resolution that authorizes the public finance authority to purchase the securities. The capital financing program authorizing resolution must state that the industrial commission has determined that private bond markets will not be responsive to the needs of the issuing political subdivision concerning the securities or, if it appears that the securities can be sold through private bond markets without the involvement of the public finance authority, the authorizing resolution must state reasons for the public finance authority’s involvement in the bond issue. The public finance authority may hold such municipal securities for any length of time it finds to be necessary. The public finance authority, for the purposes authorized by this chapter or chapter 40-57, may issue its bonds payable solely from the revenues available to the public finance authority which are authorized or pledged for payment of public finance authority obligations, and to otherwise assist political subdivisions or other contracting parties as provided in this chapter or chapter 40-57.
  2. The public finance authority may lend money to the Bank of North Dakota under terms and conditions requiring the Bank to use the proceeds to make loans for agricultural improvements that qualify for assistance under the revolving loan fund program established by chapter 61-28.2.
  3. The public finance authority may transfer money to the Bank of North Dakota for allocations to infrastructure projects and programs. Bonds issued for these purposes are payable in each biennium solely from amounts the legislative assembly may appropriate for debt service for any biennium or from a reserve fund established for the bonds. Neither the obligation of the state to pay the bonds nor the obligation of the issuer to pay debt service will constitute a debt of the state or any agency or political subdivision of the state within the meaning of any constitutional or statutory provision. The issuance of the bond does not directly or contingently obligate the state to pay the bond payments beyond the appropriation for the current biennium of the state. The issuer has no taxing power. In addition to providing funds for the transfers, the public finance authority may use the bond proceeds to pay the costs of issuance of the bonds, capitalized interest, and establish a reserve fund for the bonds.
  4. Bonds of the public finance authority issued under this chapter or chapter 40-57 are not in any way a debt or liability of the state and do not constitute a loan of the credit of the state or create any debt or debts, liability or liabilities, on behalf of the state, or constitute a pledge of the faith and credit of the state, but all such bonds are payable solely from revenues pledged or available for their payment as authorized in this chapter. Each bond must contain on its face a statement to the effect that the public finance authority is obligated to pay such principal or interest, and redemption premium, if any, and that neither the faith and credit nor the taxing power of the state is pledged to the payment of the principal of or the interest on such bonds. Specific funds pledged to fulfill the public finance authority’s obligations are obligations of the public finance authority.
  5. All expenses incurred in carrying out the purposes of this chapter or chapter 40-57 are payable solely from revenues or funds provided or to be provided under this chapter or chapter 40-57 and nothing in this chapter may be construed to authorize the public finance authority to incur any indebtedness or liability on behalf of or payable by the state.

Source: S.L. 1975, ch. 80, § 6; 1981, ch. 417, § 3; 1989, ch. 115, § 2; 1991, ch. 92, § 1; 1995, ch. 97, § 3; 2005, ch. 89, § 6; 2005, ch. 90, § 3; 2009, ch. 103, § 1; 2021, ch. 42, § 20, effective July 1, 2021; 2021, ch. 80, § 3, effective July 1, 2021.

Note.

Section 06-09.4-06 was amended 2 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 3 of Chapter 80, Session Laws 2021, House Bill 1431; and Section 20 of Chapter 42, Session Laws 2021, Senate Bill 2014.

6-09.4-07. Powers.

The public finance authority has the following powers:

  1. To sue and be sued.
  2. To make and enforce bylaws, rules, and regulations for the conduct of its affairs and business and for use of its services.
  3. To acquire, hold, use, and dispose of its income, revenue, funds, and moneys in accordance with law, this chapter or chapter 40-57, or legislative appropriations.
  4. To acquire, rent, lease, hold, use, and dispose of other personal property for its purposes.
  5. To borrow money and to issue its negotiable bonds or notes and to provide for and secure the payment thereof and to provide for the rights of the holders thereof, and to purchase, hold, and dispose of any of its bonds.
  6. To fix and revise from time to time and charge and collect fees and charges for the use of its services or facilities.
  7. To do and perform any acts and things authorized by this chapter or chapter 40-57 under, through, or by means of its officers, agents, or employees or by contracts with any person, firm, or corporation.
  8. To make, enter into, and enforce all contracts or agreements necessary, convenient, or desirable for the purposes of the public finance authority or pertaining to any loan to a political subdivision or other contracting party or any purchase or sale of municipal securities or other investments or to the performance of its duties and execution or carrying out of any of its powers under this chapter or chapter 40-57.
  9. To purchase or hold municipal securities of political subdivisions or other contracting parties at such prices and in such manner as the public finance authority shall deem advisable, and to sell municipal securities acquired or held by it at such prices without relation to cost and in such manner as the public finance authority deems advisable.
  10. To invest any funds or moneys of the public finance authority not then required for loan to political subdivisions or other contracting parties and for the purchase of municipal securities in the same manner as permitted for investment of funds belonging to the state or the Bank of North Dakota.
  11. To fix and prescribe any form of application or procedure to be required of a political subdivision or other contracting party for the purpose of any loan or the purchase of its municipal securities, and to fix the terms and conditions of any such loan or purchase and to enter into agreements with political subdivisions or other contracting parties with respect to any such loan or purchase.
  12. To consider the need, desirability, or eligibility of such loan, the ability of such political subdivision or other contracting party to secure borrowed money from other sources and the costs thereof, and the particular public improvement, project, or purpose to be financed by the municipal securities to be purchased by the public finance authority.
  13. To impose and collect charges from a political subdivision or other contracting party for its costs and services in review or consideration of any proposed loan to a political subdivision or other contracting party or purchase of municipal securities of such political subdivision or other contracting party, and to impose and collect charges therefor whether or not such loan has been made or such municipal securities have been purchased.
  14. To fix and establish any and all terms and provisions with respect to any purchase of municipal securities by the public finance authority, including dates and maturities of such bonds, provisions as to redemption or payment prior to maturity, and any and all other matters which in connection therewith are necessary, desirable, or advisable in the judgment of the public finance authority.
  15. To procure insurance against any losses in connection with its property, operations, or assets in such amounts and from such insurers as it deems desirable to pay the premiums on such insurance.
  16. To the extent permitted under its contracts with the holders of bonds of the public finance authority, to consent to any modification with respect to rates of interest, time, and payment of any installment of principal or interest, security, or any other term of bond, contract, or agreement of any kind to which the public finance authority is a party.
  17. To do all acts and things necessary, convenient, or desirable to carry out the powers expressly granted or necessarily implied in this chapter or chapter 40-57.
  18. To do and perform any act and thing authorized by section 54-01-27 or 54-17-36 under, through, or by means of its officers, agents, or employees or by contracts with any person to assist the state, or any agency or institution of the state, in making, entering, and enforcing all contracts or agreements necessary, convenient, or desirable for the purposes of leasing all or part of, or an undivided or other interest in, property.

Source: S.L. 1975, ch. 80, § 7; 2003, ch. 342, § 1; 2005, ch. 89, § 7; 2005, ch. 90, § 4.

6-09.4-08. Bonds of the public finance authority.

Bonds of the public finance authority must be authorized by resolution of the industrial commission and may be issued in one or more series and must bear such date or dates, mature at such time or times, bear interest at such rate or rates of interest per year, be in such denomination or denominations, be in such form, either coupon or registered, carry such conversion or registration privileges, have such rank or priority, be executed in such manner, be payable from such sources in such medium of payment at such place or places within or without the state, and be subject to such terms of redemption, with or without premium, as such resolution or resolutions may provide. Bonds of the public finance authority, issued to provide funds to a municipal pipeline authority, are to mature not more than thirty years from the date of issue. Bonds of the public finance authority may be sold at public or private sale at such time or times and at such price or prices as the public finance authority determines.

Source: S.L. 1975, ch. 80, § 8; 1981, ch. 417, § 4; 2005, ch. 89, § 8.

6-09.4-09. Pledges.

Any pledge of revenue or of a revenue agreement under chapter 40-57 made by the industrial commission as security for public finance authority bonds is valid and binding from time to time when the pledge is made. The industrial commission may also pledge assets of the Bank of North Dakota as security for public finance authority bonds. The revenues or other moneys so pledged and thereafter received by the public finance authority are immediately subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of any such pledge is valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the public finance authority, regardless of whether such parties have notice thereof. Neither the resolution nor any other instrument by which a pledge is created need be filed or recorded, except in the records of the public finance authority.

Source: S.L. 1975, ch. 80, § 9; 1989, ch. 115, § 3; 2005, ch. 89, § 9; 2005, ch. 90, § 5.

6-09.4-10. Reserve fund.

  1. The public finance authority shall establish and maintain a reserve fund in which there must be deposited all moneys appropriated by the state for the purpose of the fund, all proceeds of bonds required to be deposited therein by terms of any contract between the public finance authority and its bondholders or any resolution of the public finance authority with respect to the proceeds of bonds, any other moneys or funds of the public finance authority which it determines to deposit therein, any contractual right to the receipt of moneys by the public finance authority for the purpose of the fund, including a letter of credit or similar instrument, and any other moneys made available to the public finance authority only for the purposes of the fund from any other source or sources. Moneys in the reserve fund must be held and applied solely to the payment of the interest on and the principal of bonds and sinking fund payments as the same become due and payable and for the retirement of bonds, including payment of any redemption premium required to be paid when any bonds are redeemed or retired prior to maturity. Moneys in the reserve fund may not be withdrawn therefrom if the withdrawal would reduce the amount in the reserve fund to an amount less than the required debt service reserve, except for payment of interest then due and payable on bonds and the principal of bonds then maturing and payable and sinking fund payments and for the retirement of bonds in accordance with the terms of any contract between the public finance authority and its bondholders and for the payments on account of which interest or principal or sinking fund payments or retirement of bonds, other moneys of the public finance authority are not then available in accordance with the terms of the contract. The required debt service reserve must be an aggregate amount equal to at least the largest amount of money required by the terms of all contracts between the public finance authority and its bondholders to be raised in the then current or any succeeding calendar year for the payment of interest on and maturing principal of outstanding bonds, and sinking fund payments required by the terms of any contracts to sinking funds established for the payment or redemption of the bonds.
  2. If the establishment of the reserve fund for an issue or the maintenance of an existing reserve fund at a required level under this section would necessitate the investment of all or any portion of a new reserve fund or all or any portion of an existing reserve fund at a restricted yield, because to not restrict the yield may cause the bonds to be taxable under the Internal Revenue Code, then at the discretion of the public finance authority no reserve fund need be established prior to the issuance of bonds or the reserve fund need not be funded to the levels required by other subsections of this section or an existing reserve fund may be reduced.
  3. No bonds may be issued by the public finance authority unless there is in the reserve fund the required debt service reserve for all bonds then issued and outstanding and the bonds to be issued. Nothing in this chapter prevents or precludes the public finance authority from satisfying the foregoing requirement by depositing so much of the proceeds of the bonds to be issued, upon their issuance, as is needed to achieve the required debt service reserve. The public finance authority may at any time issue its bonds or notes for the purpose of providing any amount necessary to increase the amount in the reserve fund to the required debt service reserve, or to meet such higher or additional reserve as may be fixed by the public finance authority with respect to such fund.
  4. In order to assure the maintenance of the required debt service reserve, there shall be appropriated by the legislative assembly and paid to the public finance authority for deposit in the reserve fund, such sum, if any, as shall be certified by the industrial commission as necessary to restore the reserve fund to an amount equal to the required debt service reserve. However, the commission may approve a resolution for the issuance of bonds, as provided by section 6-09.4-06, which states in substance that this subsection is not applicable to the required debt service reserve for bonds issued under that resolution.
  5. If the maturity of a series of bonds of the public finance authority is three years or less from the date of issuance of the bonds, the public finance authority may determine that no reserve fund need be established for that respective series of bonds. If such a determination is made, holders of that respective series of bonds may have no interest in or claim on existing reserve funds established for the security of the holders of previously issued public finance authority bonds, and may have no interest in or claim on reserve funds established for the holders of subsequent issues of bonds of the public finance authority.
  6. The industrial commission may determine this section is inapplicable in whole or in part for bonds issued under:
    1. Section 6-09.4-06;
    2. Section 6-09.4-24; or
    3. The public finance authority’s state revolving fund program.

Source: S.L. 1975, ch. 80, § 10; 1983, ch. 123, § 2; 1985, ch. 133, §§ 1, 2; 1989, ch. 115, § 4; 1995, ch. 97, § 4; 1997, ch. 96, § 1; 2005, ch. 89, § 10; 2013, ch. 86, § 1; 2021, ch. 80, § 4, effective July 1, 2021.

6-09.4-10.1. Legacy sinking and interest fund — Debt service requirements — Public finance authority.

There is created in the state treasury the legacy sinking and interest fund. The fund consists of all moneys deposited in the fund under section 21-10-13. Moneys in the fund may be spent by the public finance authority pursuant to legislative appropriations to meet the debt service requirements for evidences of indebtedness issued by the authority for transfer to the Bank of North Dakota for allocations to infrastructure projects and programs. Any moneys in the fund in excess of the amounts appropriated from the fund to meet the debt service requirements for a biennium must be transferred by the state treasurer to the public employees retirement system main system plan under chapter 54-52, but only if the public employees retirement system main system plan’s actuarial funded ratio as reported for the most recently completed even-numbered fiscal year is less than ninety percent. If the public employees retirement system main system plan’s actuarial funded ratio is ninety percent or more and then subsequently decreases below ninety percent, the state treasurer may not resume the transfers under this subdivision unless the main system plan’s actuarial funded ratio is less than seventy percent.

Source: S.L. 2021, ch. 188, § 1, effective August 1, 2021.

6-09.4-10.2. Debt service requirements — Bonds for infrastructure projects and programs.

Each biennium, the public finance authority shall request from the legislative assembly an appropriation from the general fund, derived from legacy fund earnings, Bank of North Dakota profits, or other sources to meet the debt service requirements for bonds issued by the authority for allocations to infrastructure projects and programs.

Source: S.L. 2021, ch. 80, § 5, effective July 1, 2021.

6-09.4-11. Additional reserves and funds.

The public finance authority may establish such additional and further reserves or such other funds or accounts as may be, in its discretion, necessary, desirable, or convenient to further the accomplishment of the purposes of the public finance authority to comply with the provisions of any agreement made by or any resolution of the public finance authority.

Source: S.L. 1975, ch. 80, § 11; 2005, ch. 89, § 11.

6-09.4-12. Participation by public finance authority in bonds held by Bank of North Dakota.

The public finance authority may issue its bonds from time to time in an amount sufficient to purchase municipal securities held by the Bank of North Dakota at a price established by mutual agreement between the public finance authority and the Bank of North Dakota.

Source: S.L. 1975, ch. 80, § 12; 1989, ch. 115, § 5; 2005, ch. 89, § 12.

6-09.4-13. Personal liability.

Neither the members of the industrial commission nor any person executing bonds issued pursuant to this chapter or chapter 40-57 is liable personally on such bonds by reason of the issuance thereof.

Source: S.L. 1975, ch. 80, § 13; 1989, ch. 115, § 6; 2005, ch. 90, § 6.

6-09.4-14. Purchase of bonds of public finance authority.

The public finance authority has the power to purchase bonds of the public finance authority out of any funds or money of the public finance authority available therefor. The public finance authority may hold, cancel, or resell such bonds or notes subject to and in accordance with agreements with holders of its bonds.

Source: S.L. 1975, ch. 80, § 14; 1989, ch. 115, § 7; 2005, ch. 89, § 13.

6-09.4-15. Bonds as legal investments and security.

Notwithstanding any restrictions contained in any other law, the state and all public officers, boards, and agencies, and political subdivisions and agencies thereof, all national banking associations, state banks, trust companies, savings banks and institutions, savings and loan associations, investment companies, and other persons carrying on a banking business, and all executors, administrators, guardians, trustees, and other fiduciaries, may legally invest any sinking funds, moneys, or other funds belonging to them or within their control in any bonds issued by the public finance authority pursuant to this chapter, and the bonds are authorized security for any and all public deposits.

Source: S.L. 1975, ch. 80, § 15; 1983, ch. 319, § 7; 2005, ch. 89, § 14.

6-09.4-16. Tax exemptions.

All property of the public finance authority and all bonds issued under this chapter must be deemed to be serving essential public and governmental purposes and such property and such bonds so issued, their transfer and the income therefrom, including any profits made on the sale thereof, shall at all times be exempt from state, county, and municipal taxes of any and all kinds.

Source: S.L. 1975, ch. 80, § 16; 1989, ch. 115, § 8; 2005, ch. 89, § 15.

6-09.4-17. Exemption of property from execution sale.

All property of the public finance authority is exempt from levy and sale by virtue of an execution and no execution or other judicial process may issue against the same nor may any judgment against the public finance authority be a charge or lien upon its property; provided, that nothing contained in this chapter applies to or limits the rights of the holder of any bonds to pursue any remedy for the enforcement of any pledge or lien given by the public finance authority on its revenues. Any action or proceeding in any court to set aside a resolution authorizing the issuance of bonds by the public finance authority under this chapter or to obtain any relief upon the ground that such resolution is invalid must be commenced within ten days after the adoption of said resolution by the industrial commission. After the expiration of such period of limitation, no claim for relief or defense founded upon the invalidity of the resolution or any of its provisions may be asserted nor may the validity of the resolution or any of its provisions be open to question in any court on any ground whatever.

Source: S.L. 1975, ch. 80, § 17; 1985, ch. 82, § 8; 1989, ch. 115, § 9; 2005, ch. 89, § 16.

6-09.4-18. Insurance or guaranty.

The public finance authority is authorized and empowered to obtain from any entity of the state, any department or agency of the United States of America, or any nongovernmental insurer any insurance, guaranty, or liquidity facility, or from a financial institution a letter of credit to the extent such insurance, guaranty, liquidity facility, or letter of credit now or hereafter available, as to, or for, the payment or repayment of, interest or principal, or both, or any part thereof, on any bonds issued by the public finance authority, or on any municipal securities purchased or held by the public finance authority, pursuant to this chapter; and to enter into any agreement or contract with respect to any such insurance, guaranty, letter of credit, or liquidity facility, and pay any required fee, unless the same would impair or interfere with the ability of the public finance authority to fulfill the terms of any agreement made with the holders of its bonds.

Source: S.L. 1975, ch. 80, § 18; 1989, ch. 115, § 10; 1999, ch. 86, § 2; 2005, ch. 89, § 17.

6-09.4-19. Remedies on default of municipal securities.

In the event of default by a political subdivision in the payment of interest on or principal of any municipal securities owned or held by the public finance authority, the public finance authority may proceed to enforce payment, pursuant to applicable provisions of law, of such interest or principal or other amount then due and payable.

Source: S.L. 1975, ch. 80, § 19; 1989, ch. 115, § 11; 2005, ch. 89, § 18.

6-09.4-20. Form of municipal securities and investments.

All municipal securities held by the public finance authority as permitted or provided for under this chapter must at all times be purchased and held in fully marketable form, subject to provision for any registration in the name of the public finance authority. All municipal securities at any time purchased, held, or owned by the public finance authority must, upon delivery to the public finance authority, be in fully marketable form and accompanied by such documentation as shall from time to time be required by the public finance authority.

Source: S.L. 1975, ch. 80, § 20; 1989, ch. 115, § 12; 2005, ch. 89, § 19.

6-09.4-21. Presumption of validity.

After issuance, all bonds of the public finance authority are conclusively presumed to be fully authorized and issued under the laws of the state, and any person or governmental unit is estopped from questioning their authorization, sale, issuance, execution, or delivery by the public finance authority.

Source: S.L. 1975, ch. 80, § 21; 1989, ch. 115, § 13; 2005, ch. 89, § 20.

6-09.4-22. Protection of service during term of loan.

  1. The service provided or made available by a political subdivision through the construction or acquisition of an improvement, or the revenues therefrom, financed in whole or in part with a loan to the political subdivision from the public finance authority or any other state agency or enterprise, may not be curtailed or limited by inclusion of all or any part of the area served by the political subdivision within the boundaries of any other political subdivision, or by the granting of any private franchise for similar service within the area served by the political subdivision, during the term of the loan. The political subdivision providing the service may not be required to obtain or secure any franchise, license, or permit as a condition of continuing to serve the area if it is included within the boundaries of another political subdivision during the term of the loan.
  2. Under the circumstances described in subsection 1, nothing prevents the two political subdivisions, with the public finance authority or other state agency or enterprise, from negotiating an agreement for the right or obligation to provide the service in question, provided that any agreement is invalid and unenforceable unless the public finance authority or other state agency or enterprise is a party to the agreement and unless the agreement contains adequate safeguards to ensure the security and timely payment of any outstanding bonds of the public finance authority issued to fund the loan.

Source: S.L. 1997, ch. 97, § 1; 2005, ch. 89, § 21.

6-09.4-23. Evidences of indebtedness — Authority to withhold school district state aid.

  1. If the public finance authority or a paying agent notifies the superintendent of public instruction, in writing, that a school district has failed to pay when due the principal or interest on any evidences of indebtedness issued after July 31, 1999, or that the public finance authority, school district, or the paying agent has reason to believe a school district will not be able to make a full payment of the principal and interest when the payment is due, the superintendent of public instruction shall withhold any funds that are due or payable or appropriated to the school district under chapter 15.1-27 until the payment of the principal or interest has been made to the public finance authority or the paying agent, or until the public finance authority, school district, or the paying agent notifies the superintendent of public instruction that arrangements satisfactory to the public finance authority or the paying agent have been made for the payment of the principal and interest then due and owing. The notification must include information required by the superintendent of public instruction. State funds available to a school district under chapter 15.1-27 are not subject to withholding under this section unless the withholding is authorized by resolution of the district’s school board.
  2. Notification by the public finance authority, school district, or the paying agent that satisfactory arrangements have been made for the payment of the principal and interest then due and owing under subsection 1 must be made at least fifteen working days before the principal or interest is due. The notice must be in writing and include the name of the school district, an identification of the debt obligation issue, the date the payment is due, the amount of principal and interest due on the payment date, the amount of principal or interest the school district will be unable to pay, the paying agent for the debt obligation, the wire transfer instructions to transfer funds to the paying agent, and an indication that payment is requested under this section. A paying agent shall notify the superintendent of public instruction if the paying agent becomes aware of a potential default. If the superintendent receives notice of a requested payment under this section, the superintendent of public instruction shall withhold and transfer funds due or payable or appropriated to the school district under chapter 15.1-27 to the paying agent after:
    1. Consulting with the school district and the paying agent; and
    2. Verifying the accuracy of the provided request information.
  3. Notwithstanding any withholding of state funds under section 15-39.1-23 or any other law, the superintendent of public instruction shall make available any funds withheld under subsection 1 to the public finance authority or the paying agent. The public finance authority or the paying agent shall apply the funds to payments that the school district is required to make to the public finance authority or the paying agent.
  4. If funds are withheld from a school district and made available to the public finance authority or a paying agent under this section and if tax revenues are received by the school district during the fiscal year in which the funds are withheld and are deposited in the district’s sinking fund established in accordance with section 21-03-42, the district, with the consent of the public finance authority or the paying agent, may withdraw from its sinking fund an amount equal to that withheld by the superintendent of public instruction and made available to the public finance authority or a paying agent under this section.
  5. Any excess funds at the Bank of North Dakota escrowed pursuant to an agreement between the public finance authority and the state board of public school education for the benefit of the public finance authority and a school district must be held by the Bank. With the approval of the superintendent of public instruction, those funds may be used to subsidize the debt service payments on construction loans that are made to school districts by the public finance authority and which are subject to the withholding provisions of this section or construction loans made to school districts under the state school construction program established by section 11 of chapter 2 of the 1989 Session Laws. Notwithstanding the existence of an escrow agreement between the public finance authority and the state board of public school education, those funds must be transferred to the public finance authority upon certification by the public finance authority that the funds are in excess of the amount needed to provide for the payment in full of the outstanding principal and interest, when due, on the public finance authority bonds issued to purchase the municipal securities for which the escrow fund was established.
  6. The superintendent of public instruction shall develop detailed procedures for school districts to notify the superintendent of public instruction that they have obligated themselves to be bound by the provisions of this section; procedures for school districts, paying agents, and the public finance authority to notify the superintendent of public instruction of potential defaults and to request payment under this section; and procedures for the state to expedite payments to prevent defaults.

Source: S.L. 1999, ch. 86, § 1; 2001, ch. 161, § 1; 2005, ch. 89, § 22; 2011, ch. 80, § 1; 2017, ch. 78, § 1, effective August 1, 2017.

6-09.4-24. Public finance authority — Issuance on behalf of other state agencies.

The public finance authority may issue bonds or other evidences of indebtedness on behalf of other state agencies, instrumentalities, or officers, including the farm finance agency, industrial commission, North Dakota building authority, student loan trust, and any other state agency, instrumentality, or officer authorized by law to issue bonds or other evidences of indebtedness and which elects to enter into an administrative agreement with the public finance authority under this chapter. The public finance authority may be assisted by any other official appointed by the industrial commission to aid the executive director or to serve as an authorized officer of the public finance authority from time to time. Notwithstanding any other provision of law, in issuing bonds or other evidences of indebtedness and in administering or managing any bond issue postissuance on behalf of any other state agency, instrumentality, or officer, the public finance authority may exercise any of the powers and authority of that state agency, instrumentality, or officer which the industrial commission determines to be necessary or expedient in the issuance of bonds or other evidences of indebtedness or in the administration or management of the issue. Any bonds or other evidences of indebtedness issued by the public finance authority on behalf of any other state agency, instrumentality, or officer, if so determined by the industrial commission, continues to be the obligation or liability of the state agency or instrumentality as otherwise provided by law and not an obligation or liability of the public finance authority.

Source: S.L. 2005, ch. 89, § 23.

6-09.4-25. Administrative agreements with state agencies and instrumentalities to issue bonds and other evidences of indebtedness.

The public finance authority and any state agency, instrumentality, or officer authorized by law to issue bonds or other evidences of indebtedness to obtain funds for any authorized purpose may enter into an administrative agreement. The agreement may delegate to the public finance authority the power and authority to issue bonds or other evidences of indebtedness on behalf of the state agency, instrumentality, or officer to obtain funds for any other purpose authorized by law and may contain such other necessary or expedient terms and conditions as the industrial commission and the parties to the administrative agreement approve to effect the issuance of the bonds or other evidences of indebtedness and to aid in the administration or management of any bond issue after issuance.

Source: S.L. 2005, ch. 89, § 24.

6-09.4-26. Public finance authority as continuation of and successor in interest to municipal bond bank.

  1. Beginning August 1, 2005, the public finance authority is deemed the continuation of and successor in interest to the municipal bond bank and any reference to the municipal bond bank or bond bank in any agreement, certificate, contract, covenant, indenture, resolution, recital, undertaking, bond, note, other evidence of indebtedness, or in any other document or instrument means the public finance authority.
  2. The public finance authority as the continuation of and successor in interest to the municipal bond bank is deemed to:
    1. Possess all rights, title, privileges, powers, immunities, property, assets, and claims of the bond bank; and
    2. Fulfill and perform all obligations of the bond bank, including all bond bank obligations relating to outstanding bonds and notes.

Source: S.L. 2005, ch. 89, § 25.

6-09.4-27. Confidentiality of certain public finance authority records.

Commercial or financial information of a contracting party provided to the public finance authority as part of any qualified small issue bonds or municipal industrial revenue bonds purchased or issued by the public finance authority, whether obtained directly or indirectly, are confidential records. Confidential records do not include routine credit inquiries; records required to be disclosed by due legal process; the name, address, and contact information of a contracting party; or the amount loaned to a contracting party.

Source: S.L. 2007, ch. 92, § 1.

CHAPTER 6-09.5 Community Water Facility Loans [Repealed]

6-09.5-01. Community Water Facility Loan Act — Intent. [Repealed]

Source: S.L. 1977, ch. 81, § 1; 1997, ch. 94, § 3; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-02. Community water facility — Definition. [Repealed]

Source: S.L. 1977, ch. 81, § 2; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-03. Transfer of funds — Revolving fund. [Repealed]

Source: S.L. 1977, ch. 81, § 3; 2013, ch. 20, § 16; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-04. Loan applications — Approval. [Repealed]

Source: S.L. 1977, ch. 81, § 4; 1997, ch. 94, § 4; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-05. Fund supervision and administration. [Repealed]

Source: S.L. 1977, ch. 81, § 5; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-05.1. Audit and costs of administration. [Repealed]

Source: S.L. 1989, ch. 110, § 9; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-06. Fund purposes. [Repealed]

Source: S.L. 1977, ch. 81, § 6; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-07. Loan terms. [Repealed]

Source: S.L. 1977, ch. 81, § 7; 1983, ch. 124, § 1; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-08. Loan eligibility. [Repealed]

Source: S.L. 1977, ch. 81, § 8; 1997, ch. 94, § 5; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-09. Project service area alternatives. [Repealed]

Source: S.L. 1977, ch. 81, § 9; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-10. Rules and regulations. [Repealed]

Source: S.L. 1977, ch. 81, § 10; 1997, ch. 94, § 6; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

6-09.5-11. Powers of Bank of North Dakota. [Repealed]

Source: S.L. 1977, ch. 81, § 11; repealed by 2021, ch. 80, § 6, effective July 1, 2021.

CHAPTER 6-09.6 Developmentally Disabled Facility Loan Program [Repealed]

[Repealed by S.L. 2011, ch. 81, § 1]

6-09.6-01. Revolving loan fund — Appropriation. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

6-09.6-01.1. Developmentally disabled facility loan fund program no. 2. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

6-09.6-01.2. Developmentally disabled facility loan fund program no. 3. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

6-09.6-02. Administration of revolving fund. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

6-09.6-02.1. Audit and costs of administration. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

6-09.6-03. Amount of loan — Terms and conditions. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

6-09.6-04. Standards — Administration procedure. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

6-09.6-05. Powers of Bank of North Dakota. [Repealed]

Repealed by S.L. 2011, ch. 81, § 1.

CHAPTER 6-09.7 Fuel Production Facility Loan Guarantee Program

6-09.7-01. Guarantee loan program — Administration — Advisory board.

The Bank of North Dakota shall administer the state guarantee loan program as provided in this chapter. The advisory board of directors to the Bank of North Dakota appointed pursuant to chapter 6-09.1 shall act in an advisory capacity concerning the program.

Source: S.L. 1981, ch. 130, § 1; 1989, ch. 116, § 1.

6-09.7-02. Powers and duties of the Bank of North Dakota.

The Bank of North Dakota may take, hold, and administer, on behalf of the state from any source, any property, or any interest in the property, and the income therefrom, either absolutely or in trust, for any purpose of the state guarantee loan program; provided, that no guarantee obligation of the Bank is payable out of any moneys of the Bank except those made available to the Bank under this chapter. The Bank shall establish the types of projects and ventures eligible to be guaranteed under this chapter.

Source: S.L. 1981, ch. 130, § 2; 2011, ch. 82, § 1; 2013, ch. 87, § 1; 2019, ch. 85, § 1, effective August 1, 2019.

6-09.7-03. Extent of loan guarantee. [Expired]

Source: S.L. 1981, ch. 130, § 3; 2011, ch. 82, § 2; Expired under S.L. 2013, ch. 87, § 4.

6-09.7-04. Bank to prescribe the rate of interest on guaranteed loan.

Any loan guaranteed by the Bank of North Dakota must bear interest at a rate not in excess of the interest charged by the lender to other persons for similar types of loans not guaranteed by the Bank unless the Bank determines that a higher rate of interest is justified by special circumstances and would be consistent with the general objectives of this chapter.

Source: S.L. 1981, ch. 130, § 4.

6-09.7-05. Establishment and maintenance of adequate guarantee funds — Use of strategic investment and improvements fund.

The Bank of North Dakota shall establish and at all times maintain an adequate guarantee reserve fund in a special account in the Bank. The Bank may request the director of the office of management and budget to transfer funds from the strategic investment and improvements fund created by section 15-08.1-08 to maintain one hundred percent of the guarantee reserve fund balance. Transfers from the strategic investment and improvements fund may not exceed a total of eighty million dollars. Moneys in the guarantee reserve fund are available to reimburse lenders for guaranteed loans in default. The securities in which the moneys in the reserve fund may be invested must meet the same requirements as those authorized for investment under the state investment board. The income from such investments must be made available for the costs of administering the state guarantee loan program and income in excess of that required to pay the cost of administering the program must be deposited in the reserve fund. The amount of reserves for all guaranteed loans must be determined by a formula that will assure, as determined by the Bank, an adequate amount of reserve.

Source: S.L. 1981, ch. 130, § 5; 2011, ch. 82, § 3; 2011, ch. 483, § 4; 2013, ch. 87, § 3; 2019, ch. 85, § 2, effective August 1, 2019; 2021, ch. 82, § 1, effective August 1, 2021.

6-09.7-06. Procedure on default of guaranteed loan.

Whenever it appears to the satisfaction of the Bank of North Dakota that a guaranteed loan is in default, and the eligible lender has certified this fact to the Bank, the Bank shall reimburse the eligible lender making the loan from the reserve fund to the extent the loan was guaranteed by the fund. Whenever payment of the guaranteed principal balance of any guaranteed loan is demanded of the Bank, the note and accompanying evidence of the loan must be tendered to the Bank in manner and form to confer good title so that the loan may be collected by the Bank as it may determine according to law. No statute of limitations may be used as a defense against collection, through court proceedings, of any loan guaranteed under this chapter.

Source: S.L. 1981, ch. 130, § 6.

6-09.7-07. Fees for reasonable costs.

The Bank of North Dakota may charge reasonable fees for guaranteeing of loans under this chapter, and the fees must be available to defray costs of administering the state guarantee loan program. Fees in excess of the amount required to pay the cost of administering the program must be deposited in the reserve fund.

Source: S.L. 1981, ch. 130, § 7.

6-09.7-08. Limitation on additional state aid. [Repealed]

Repealed by S.L. 2011, ch. 82, § 4.

6-09.7-09. Agricultural real estate loans — Guarantee.

The Bank of North Dakota may guarantee the loan of money by banks, credit unions, lending institutions that are part of the farm credit system, and savings and loan associations in this state to eligible persons for the purchase of agricultural real estate or the restructuring of agricultural real estate loans, provided the transactions do not exceed a loan-to-value ratio of eighty percent and further provided that no single loan exceed four hundred thousand dollars. The Bank of North Dakota may have no more than eight million dollars in outstanding loan guarantees under this section. The Bank of North Dakota may establish additional terms, conditions, and procedures, as necessary to meet the requirements of this section.

Source: S.L. 2003, ch. 80, § 1; 2007, ch. 93, § 1.

CHAPTER 6-09.8 Beginning Farmer Loan Guarantee Program

6-09.8-01. Definitions.

As used in this chapter, unless the context or subject matter requires otherwise:

  1. “Beginning farmer” means an individual who qualifies as a beginning farmer who:
    1. Is a resident of this state;
    2. Receives more than half of that person’s gross annual income from farming, unless the person initially commences farming during the year of the application under this chapter;
    3. Intends to use any farmland to be purchased or rented for agricultural purposes;
    4. Is adequately trained by education in the type of farming operation which the person wishes to begin on the purchased or rented land referred to in subdivision c through satisfactory participation in the adult farm management education program of the state board for career and technical education or an equivalent program approved by the agriculture commissioner; and
    5. Has, including the net worth of any dependents and spouse, a net worth of less than one hundred thousand dollars, not including the value of their equity in their principal residence, the value of one personal or family motor vehicle, and the value of their household goods, including furniture, appliances, musical instruments, clothing, and other personal belongings.
  2. “Lender” means any lending institution which is regulated or funded under the laws of this state or the United States and which has provided financing to a beginning farmer for the purchase of qualified agricultural property.
  3. “Loan guarantee” means an agreement that in the event of default by a beginning farmer under a contract for deed, a note and mortgage, or other loan or financing agreement, the Bank shall pay the seller or lender ninety percent of the amount of principal due the seller or lender on a real estate transaction and up to fifty percent of the amount of principal due the seller or lender on a personal property loan at the time the claim is approved from the loan guarantee fund.
  4. “Qualified agricultural property” means real estate or depreciable personal property used in the production of agricultural products. Depreciable personal property means personal property that may be depreciated under generally accepted accounting principles and is designed for use in more than one production year.
  5. “Seller” means any person, association, partnership, corporation, or limited liability company which has provided financing to a beginning farmer for the purchase of qualified agricultural property or which has entered into a contract for deed with a beginning farmer for the sale and purchase of agricultural real estate.

Source: S.L. 1983, ch. 126, § 1; 1985, ch. 135, § 2; 1993, ch. 54, § 106; 2009, ch. 545, § 1.

Law Reviews.

Summary of significant decisions rendered by the North Dakota Supreme Court in 1990 relating to farm mortgages, 66 N.D. L. Rev. 753 (1990).

6-09.8-02. Beginning farmer loan guarantee program — Administration by the Bank of North Dakota.

The Bank of North Dakota shall administer the beginning farmer loan guarantee program established by this chapter.

Source: S.L. 1983, ch. 126, § 1.

6-09.8-03. Loan guarantee fund — Administrative charges.

There is hereby created a beginning farmer loan guarantee fund which must be used by the Bank to carry out the provisions of this chapter. The fund must include the moneys appropriated by section 54-17-31 as it existed on June 30, 1983, and all earnings, less any administrative charges, from the investment of those moneys, and such moneys are hereby appropriated to the beginning farmer loan guarantee fund. Any and all administrative charges of the Bank necessary for the administration of the program established by this chapter may be charged to earnings of the fund.

Source: S.L. 1983, ch. 126, § 1.

Note.

Section 54-17-31, referred to in this section, was repealed by S.L. 1983, ch. 126, § 2.

Chapter 135, § 7, S.L. 1985, appropriated all moneys remaining in the beginning farmer loan guarantee fund created by this section to the beginning farmer revolving loan fund established under section 6-09-15.5.

6-09.8-04. Application for guarantee. [Repealed]

Source: S.L. 1983, ch. 126, § 1; 1985, ch. 135, § 3; repealed by 2019, ch. 54, § 13, effective August 1, 2019.

6-09.8-05. Term — Annual fee.

The term of a loan guarantee may not exceed five years. The Bank may charge a seller or lender an annual fee during the term of a loan guarantee.

Source: S.L. 1983, ch. 126, § 1.

6-09.8-06. Termination.

A loan guarantee may be terminated by the Bank upon the sale, exchange, assignment, or transfer of the beginning farmer’s interest in the qualified agricultural property and must be terminated if the Bank determines that the loan guarantee was obtained by fraud or material misrepresentation of which the lender or seller has actual knowledge.

Source: S.L. 1983, ch. 126, § 1; 1985, ch. 135, § 4.

6-09.8-07. Rules.

The Bank shall adopt rules to implement this chapter, which may include a formula for determining the ratio of reserves in the loan guarantee fund to the amount of guaranteed loans, the maximum dollar amount of a guarantee, and the maximum allowable annual interest rate on a loan eligible for a guarantee.

Source: S.L. 1983, ch. 126, § 1.

CHAPTER 6-09.9 Family Farm Survival Act

6-09.9-01. Short title.

This chapter may be known as the Family Farm Survival Act of 1985.

Source: S.L. 1985, ch. 136, § 1.

6-09.9-02. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Farmer” means a resident of this state who owns or operates an existing farm or ranch operation, and has a debt-to-asset ratio of fifty percent or greater or a net worth of less than an amount determined by the Bank of North Dakota. The industrial commission may adopt additional eligibility criteria in determining who is a farmer eligible for loans under this chapter.
  2. “Operating loan” means a loan or extension of credit with a term of one year or less made by a nongovernmental financial institution to a farmer for the operation of an existing farm or ranch operation. An operating loan includes a farmers home administration subordinated operating loan and guaranteed operating loan and may be further defined by rule of the industrial commission.

Source: S.L. 1985, ch. 136, § 2; 1987, ch. 130, § 1; 1989, ch. 117, § 1; 2007, ch. 94, § 1; 2009, ch. 104, § 1.

6-09.9-03. Operating loans — Participation by the Bank of North Dakota.

  1. The Bank of North Dakota shall make available an appropriate amount of funds to purchase participation interests in operating loans to farmers. Interest charged on a participation interest purchased by the Bank under this section may not exceed one percent less than the Bank’s base rate, as it may be established from time to time. The Bank may charge necessary and reasonable fees as determined by the industrial commission.
  2. The amount of a participation interest purchased by the Bank under this section may not be greater than sixty-five percent of the loan amount or an amount determined by the Bank, whichever is less. The term of any participation interest purchased under this section may not exceed one year.
  3. The Bank and the originating financial institution shall determine whether a borrower must obtain insurance on property pledged as security for a loan under this chapter.

Source: S.L. 1985, ch. 136, § 3; 1989, ch. 117, § 2; 2005, ch. 91, § 1; 2009, ch. 104, § 2.

6-09.9-04. Participation loans by private financial institutions.

  1. The industrial commission may adopt rules relating to the maximum rate of interest charged on the portion of the operating loan retained by a participating financial institution.
  2. All participation interests purchased are subject to the review and approval of the Bank.

Source: S.L. 1985, ch. 136, § 4; 1987, ch. 130, § 2; 1989, ch. 117, § 3.

6-09.9-05. Interest buy down.

  1. There is hereby established an interest rate buydown fund to be maintained by the industrial commission at the Bank of North Dakota.
  2. The industrial commission may buydown or reduce the interest paid by a farmer or agribusiness on the Bank’s portion of the participation operating loans by up to an additional five percentage points a year below the amount provided in section 6-09.9-03.
  3. Any interest buydown provided under this section must be repaid by the farmer or agribusiness not later than July 1, 1991, under terms approved by the Bank of North Dakota and pursuant to rules adopted by the industrial commission. Money collected under this subsection must be deposited in the fire and tornado fund in the state treasury.

Source: S.L. 1985, ch. 136, § 5.

6-09.9-06. Agribusinesses. [Repealed]

Repealed by S.L. 1989, ch. 117, § 4; S.L. 1989, ch. 110, § 11.

6-09.9-07. Rules.

The industrial commission may adopt such rules and guidelines as are necessary to implement sections 6-09.9-01 through 6-09.9-05.

Source: S.L. 1985, ch. 136, § 7; 1991, ch. 54, § 2.

CHAPTER 6-09.10 Credit Review Board and Agricultural Mediation

6-09.10-01. Definitions.

As used in this chapter, unless the context requires otherwise:

  1. “Board” means the credit review board, or its authorized agent when applicable.
  2. “Farmer” means a person who is or was involved in the production of an agricultural commodity or livestock.

Source: S.L. 1985, ch. 137, § 1; 1991, ch. 93, § 1; 1993, ch. 54, § 106; 2011, ch. 83, § 4.

6-09.10-02. Credit review board.

  1. The board consists of:
    1. One individual who has experience as a director or officer of a financial institution, appointed by the governor;
    2. One individual who has experience as a director or officer of a financial institution, appointed by the attorney general;
    3. One individual actively engaged in farming in the state, appointed by the governor;
    4. One individual actively engaged in farming in the state, appointed by the attorney general; and
    5. Two individuals actively engaged in farming in the state, appointed by the agriculture commissioner.
  2. A board member may not be an employee or official of the state during the member’s term of office.
  3. The term of office for members of the board is two years. An individual may serve consecutive terms.
    1. Annually, the board shall elect one member to serve as the chairman.
    2. The chairman shall call all meetings of the board.

Source: S.L. 1985, ch. 137, § 2; 1987, ch. 131, § 1; 1993, ch. 42, § 4; 2011, ch. 83, § 5.

6-09.10-02.1. Additional duties of board.

In addition to other powers and duties enumerated in this chapter, the board shall:

  1. Establish policy for the North Dakota mediation service.
  2. Recommend policies and procedures to the industrial commission regarding farm loan programs of the Bank of North Dakota.

Source: S.L. 1993, ch. 42, § 5; 1995, ch. 98, § 1; 1995, ch. 108, § 2; 1997, ch. 49, § 2; 2003, ch. 138, § 4; 2007, ch. 95, § 1; 2011, ch. 83, § 6.

Note.

Section 2 of chapter 20, S.L. 1999, effective July 1, 1999, provides:

“ LEGISLATIVE INTENT — FARM MANAGEMENT PROGRAM FEES. It is the intent of the fifty-sixth legislative assembly that all fees collected for farm management programs pursuant to sections 6-09.10-02.1 and 6-09.10-06 be transferred to the state board for vocational and technical education. The state board for vocational and technical education shall distribute the fees as it determines necessary to state agencies and organizations involved in providing farm management programs.”

6-09.10-03. North Dakota mediation service — Establishment — Administration — Fees.

  1. The agriculture commissioner shall establish and administer a mediation service.
  2. The commissioner shall appoint the administrator of the mediation service and shall hire negotiators, mediators, and other necessary personnel.
  3. The board may establish the fees to be paid by those using the North Dakota mediation service. The fees, which must be used to support continuation of the service, may not exceed twenty-five dollars per hour.
  4. The board shall adopt policies governing the North Dakota mediation service’s negotiators, mediators, and other personnel, as well as the nature and scope of all mediation efforts.

Source: S.L. 1985, ch. 137, § 3; 1987, ch. 131, § 2; 1989, ch. 109, § 3; 1991, ch. 93, § 2; 1991, ch. 95, § 7; 1993, ch. 82, § 1; 1995, ch. 98, § 2; 1997, ch. 98, § 1; 1999, ch. 87, § 1; 2001, ch. 102, § 1; 2007, ch. 96, § 1; 2009, ch. 72, § 28; 2011, ch. 83, § 7.

Law Reviews.

The North Dakota Agricultural Mediation Service, 70 N.D. L. Rev. 295 (1994).

6-09.10-03.1. Board compensation.

Each member of the board is entitled to receive compensation in the amount of one hundred thirty-five dollars per day plus reimbursement for expenses as provided by law for state officers if the member is attending meetings or performing duties directed by the board.

Source: S.L. 2011, ch. 83, § 8.

Effective Date.

This section became effective July 1, 2011.

6-09.10-04. Request for assistance — Negotiation — Mediation.

A farmer, creditor, person dealing with a farmer, person eligible for mediation with an agency of the United States department of agriculture, a landowner, or an owner, lessee, or lessor of mineral interests may request assistance from the North Dakota mediation service. Upon receipt of the request, and upon consent of all parties to mediation, the administrator of the North Dakota mediation service may assign a negotiator or mediator to assist the parties in reaching a voluntary settlement.

Source: S.L. 1985, ch. 137, § 4; 1987, ch. 131, § 3; 1989, ch. 109, § 4; 1991, ch. 93, §§ 3, 4; 2007, ch. 96, § 2; 2011, ch. 83, § 9.

6-09.10-04.1. Liability.

The board, commissioner, administrator, negotiators, mediators, and other personnel are not subject to any liability arising from any actions or omissions in attempting to reach a settlement.

Source: S.L. 1987, ch. 131, § 4; 1989, ch. 109, § 5; 2011, ch. 83, § 10.

6-09.10-05. Interest rate buydowns by the board. [Repealed]

Repealed by S.L. 2011, ch. 83, § 15.

6-09.10-06. Fund — Appropriation.

  1. On July 1, 2011, the state treasurer shall transfer any moneys remaining in the home-quarter fund to the agriculture commissioner.
  2. Any moneys transferred, as required by subsection 1, are appropriated to the agriculture commissioner, for the purposes of this chapter.
  3. If it appears to the board that the moneys appropriated to the agriculture commissioner for the North Dakota mediation service are insufficient, the agriculture commissioner may petition the emergency commission for a transfer from the state contingency fund. The emergency commission may grant the transfer request, or so much of the request as may be necessary, if it finds that an emergency situation exists, due to increasing requests for mediation.

Source: S.L. 1985, ch. 137, § 6; 1989, ch. 118, § 1; 1995, ch. 98, § 3; 1997, ch. 49, § 3; 2003, ch. 138, § 5; 2011, ch. 83, § 11.

Note.

Section 2 of chapter 20, S.L. 1999, effective July 1, 1999, provides:

“ LEGISLATIVE INTENT — FARM MANAGEMENT PROGRAM FEES. It is the intent of the fifty-sixth legislative assembly that all fees collected for farm management programs pursuant to sections 6-09.10-02.1 and 6-09.10-06 be transferred to the state board for vocational and technical education. The state board for vocational and technical education shall distribute the fees as it determines necessary to state agencies and organizations involved in providing farm management programs.”

6-09.10-07. Interest rates — Repayment — Loan qualification. [Repealed]

Repealed by S.L. 2011, ch. 83, § 15.

6-09.10-08. Home-quarter — Appraised value. [Repealed]

Repealed by S.L. 2011, ch. 83, § 15.

6-09.10-08.1. Contract for legal and tax assistance — Administration. [Repealed]

Repealed by S.L. 1997, ch. 98, § 3.

6-09.10-08.2. Legal and tax service contract requirements. [Repealed]

Repealed by S.L. 1997, ch. 98, § 3.

6-09.10-08.3. Eligible farmers and small business persons. [Repealed]

Repealed by S.L. 1997, ch. 98, § 3.

6-09.10-08.4. Payment for assistance. [Repealed]

Repealed by S.L. 1997, ch. 98, § 3.

6-09.10-08.5. Alternatives to litigation — Cooperation with other service providers. [Repealed]

Repealed by S.L. 1997, ch. 98, § 3.

6-09.10-08.6. Assumption of powers and duties of credit review board. [Repealed]

Repealed by S.L. 1997, ch. 98, § 3.

6-09.10-09. Rulemaking authority.

The board may adopt rules under chapter 28-32 as are necessary to implement this chapter.

Source: S.L. 1985, ch. 137, § 9.

6-09.10-10. Mediation — Open records and meetings exception.

    1. Information created, collected, or maintained, by the North Dakota mediation service, in the course of any formal or informal mediation, is confidential and not subject to the open records requirements of section 44-04-18. The information may be released only upon the written consent of all parties to the mediation or pursuant to an order issued by the court upon a showing of good cause.
      1. Mediation communication is confidential and not subject to the open records requirements of section 44-04-18. Mediation communication may be released only upon the written consent of all parties to the mediation or pursuant to an order issued by the court upon a showing of good cause.
      2. For purposes of this subdivision, “mediation communication” means a written statement, and an oral statement or any nonverbal communication, either of which must be inscribed on a tangible medium or stored in a medium that is retrievable in perceivable form, provided the communication occurs during a mediation or is made for purposes of considering, initiating, conducting, continuing, or reconvening a mediation.
  1. All mediation meetings and meetings involving the board, negotiators, mediators, or other personnel are confidential, closed meetings and are not subject to the open meetings requirements of section 44-04-19.

Source: S.L. 1989, ch. 109, § 8; 1991, ch. 93, § 5; 1997, ch. 98, § 2; 2011, ch. 83, § 12; 2015, ch. 83, § 1, effective August 1, 2015.

6-09.10-11. Agriculture commissioner — Authorization to receive and expend moneys.

The agriculture commissioner may receive and expend any public or nonpublic moneys that become available for the purpose of defraying the expenses of the North Dakota mediation service.

Source: S.L. 1989, ch. 109, § 9; 2011, ch. 83, § 13.

CHAPTER 6-09.11 Financial Assistance for Family Farmers

6-09.11-01. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Family farm” means agricultural real estate operated and owned or leased by a farmer, or other organization authorized to own or lease land used for farming or ranching under chapter 10-06.1, where the majority of the labor necessary to operate the farm is performed by the farmer and the farmer’s family, if any.
  2. “Farmer” means a resident of North Dakota whose principal occupation is or will be the production of an agricultural commodity or livestock on a family farm if granted a loan.

Source: S.L. 1987, ch. 133, § 2; 1989, ch. 119, § 1; 1993, ch. 54, § 106.

6-09.11-02. Industrial commission — Powers and duties — Bonds. [Repealed]

Source: S.L. 1987, ch. 133, § 3; repealed by 2019, ch. 54, § 13, effective August 1, 2019.

6-09.11-03. Loans — Participation by the Bank of North Dakota.

  1. The Bank of North Dakota may make available an appropriate amount of funds to purchase participation interests in loans made by financial institutions for the purposes as set forth in section 6-09.11-04.
    1. Interest charged on a participation interest purchased by the Bank under this section may not be greater than one percent less than the Bank’s base rate as in effect from time to time and may float.
    2. A loan may be a fixed rate at the Bank’s then current base rate for up to ten years. The rate during the remaining term of the loan floats at the Bank’s base rate as in effect from time to time.
    3. However, the interest rate may not exceed eleven percent during the course of the loan. The Bank may charge for necessary and reasonable fees as determined by the industrial commission.
  2. The amount of a participation interest purchased by the Bank under this section may not be greater than the lesser of an amount determined by the Bank or ninety percent of the loan amount.

Source: S.L. 1987, ch. 133, § 4; 1989, ch. 119, § 2; 1993, ch. 83, § 1; 1999, ch. 88, § 1; 2005, ch. 92, § 1; 2009, ch. 104, § 3; 2019, ch. 81, § 2, effective August 1, 2019.

6-09.11-04. Loans to farmers — Purposes.

The following purposes are eligible to be funded by bond proceeds or loan participations under this chapter:

  1. Purchasing agricultural real estate;
  2. Constructing, repairing, altering, or adding to any farm buildings on agricultural real estate owned or purchased by the farmer;
  3. Making permanent improvements to agricultural real estate owned or purchased by the farmer for the purpose of increasing the productive value of the land or promoting conservation of the soil;
  4. Purchasing farm equipment;
  5. Purchasing livestock;
  6. Paying off and discharging mortgages, encumbrances, and other charges or liens against or on the agricultural real or personal property owned or purchased by the farmer; and
  7. Restructuring operating debt carryover.

Source: S.L. 1987, ch. 133, § 5; 1989, ch. 69, § 2; 1989, ch. 119, § 3; 2011, ch. 83, § 14.

6-09.11-05. Loan applications.

An applicant for a loan must meet all of the following qualifications:

  1. The applicant is at least eighteen years of age.
  2. The applicant is a farmer.
  3. The applicant has had the farming experience and training necessary to enable the applicant to operate a family farm and to make proper use of the proceeds of the loan.
  4. The net worth of the applicant does not exceed an amount determined by the Bank of North Dakota.

Source: S.L. 1987, ch. 133, § 6; 1999, ch. 88, § 2; 2005, ch. 92, § 2; 2009, ch. 104, § 4.

6-09.11-06. Loan restrictions.

  1. A loan under this chapter may not be greater than the lesser of an amount determined by the Bank of North Dakota or ninety percent of the appraised value of the security given for the loan, with the actual percentage to be determined by the Bank. The Bank may do all things and acts, may require such security, and may establish additional terms and conditions as is determined necessary to purchase a participation interest in a loan under this chapter.
  2. Except as otherwise provided:
    1. A loan under this chapter must be repayable in installments and may have a term up to thirty years.
    2. All or part of a loan under this chapter may be repaid at any time, subject to conditions set forth in the mortgage.

Source: S.L. 1987, ch. 133, § 7; 1989, ch. 119, § 4; 1999, ch. 88, § 3; 2007, ch. 94, § 2; 2009, ch. 104, § 5; 2011, ch. 78, § 2.

6-09.11-07. Insurance requirements.

The Bank of North Dakota and the originating financial institution shall determine whether a borrower must obtain insurance on property pledged as security for a loan under this chapter.

Source: S.L. 1987, ch. 133, § 8; 1989, ch. 119, § 5.

6-09.11-08. Records.

Every borrower shall keep records showing the financial condition of the borrower’s family farm.

Source: S.L. 1987, ch. 133, § 9.

6-09.11-09. Postponement of repayment of principal.

If the income of a borrower is reduced in any year due to causes beyond the borrower’s control to the extent that the borrower is unable to make a payment on a loan under this chapter, the Bank of North Dakota and the originating lender may defer the payment of the principal sum due in that year and the term of the loan may be extended for the period of deferment.

Source: S.L. 1987, ch. 133, § 10; 1989, ch. 119, § 6.

6-09.11-10. Credit review board. [Repealed]

Repealed by S.L. 2011, ch. 83, § 15.

6-09.11-11. Rules.

The industrial commission may adopt such rules and guidelines as are necessary to implement sections 6-09.11-01 through 6-09.11-09.

Source: S.L. 1987, ch. 133, § 12.

CHAPTER 6-09.12 Oil and Gas Development Loans

6-09.12-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Developer” means a resident of this state or a corporation generating fifty percent or more of its income within this state.
  2. “Oil and gas development” means oil and gas well reworking operations; oil and gas well recompletion operations; oil and gas enhanced recovery operations, including secondary and tertiary recovery operations; and purchase of producing oil and gas wells.
  3. “Oil and gas development project” means a project financed under this chapter.

Source: S.L. 1989, ch. 120, § 1.

6-09.12-02. Bank of North Dakota may make loans for oil and gas development projects.

The North Dakota industrial commission shall establish a program through the Bank of North Dakota for the purpose of participating in loans made by North Dakota financial institutions for oil and gas development projects undertaken by developers within the state. The Bank’s total participation in any one loan may not exceed one hundred thousand dollars. The interest on a loan may not be greater than the Bank’s base rate as in effect from time to time and may float.

Source: S.L. 1989, ch. 120, § 2.

CHAPTER 6-09.13 Agriculture Partnership in Assisting Community Expansion

6-09.13-01. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Agriculture partnership in assisting community expansion fund” means a fund established to buy down the interest rate on loans to on-farm businesses under this chapter.
  2. “Family farm” means agricultural real estate operated and owned or leased by a farmer, or other organization authorized to own or lease land used for farming or ranching under chapter 10-06.1.
  3. “Farm business” means any business conducted by the farmer or farmer’s family, which is integrated into the farm operation and is intended to supplement farm income to allow the farmer to continue farming. The term may include nontraditional agricultural, manufacturing, processing, value-added processing, targeted service industries, or other activities calculated to produce income, and subsurface field tiling projects.
  4. “Farmer” means a resident of North Dakota whose principal occupation is the production of an agricultural commodity or livestock on a family farm.
  5. “On-farm business” means any farm business located on a family farm. If a farmer can demonstrate compelling economic reasons for locating a business in a community adjacent to the family farm and financial assistance under this chapter will not give the farmer an unfair economic advantage over a similar non-farm business, the business may qualify as on-farm.

Source: S.L. 1991, ch. 95, § 8; 1993, ch. 54, § 106; 1993, ch. 84, § 1; 2011, ch. 84, § 1.

6-09.13-02. Loans — Participation by the Bank of North Dakota.

  1. The Bank of North Dakota may make available an appropriate amount of funds to purchase participation interests in loans made by financial institutions for the purposes as set forth in section 6-09.13-03.
  2. The amount of a participation interest purchased by the Bank under this section must be not less than fifty percent nor more than eighty percent of the loan amount.
  3. The Bank shall adopt rules to implement this chapter.

Source: S.L. 1991, ch. 95, § 8; 1993, ch. 84, § 2; 2007, ch. 80, § 3.

6-09.13-03. Loans to farmers — Purposes — Eligible uses.

The loan moneys received by a farmer under this chapter must be used for a farm business. Eligible uses are:

  1. Purchase of real property and equipment.
  2. Expansions.
  3. Working capital.
  4. Purchase of inventory.
  5. Subsurface field tiling projects.

The moneys cannot be used to refinance any existing debt.

Source: S.L. 1991, ch. 95, § 8; 2011, ch. 84, § 2.

6-09.13-04. Agriculture partnership in assisting community expansion fund established — Continuing appropriation.

The agriculture partnership in assisting community expansion fund is hereby established and is a revolving fund, and all moneys transferred into the fund, interest upon fund moneys, and payments to the fund are hereby appropriated for the purposes of section 6-09.13-05. After December 31, 1992, moneys may be transferred between this fund and the partnership in assisting community expansion fund established in section 6-09.14-02. This fund is not subject to section 54-44.1-11.

Source: S.L. 1991, ch. 95, § 8.

6-09.13-05. Interest rate buydown.

The Bank of North Dakota may use moneys in the agriculture partnership in assisting community expansion fund to reduce the interest rate on loans made under this chapter.

Source: S.L. 1991, ch. 95, § 8.

CHAPTER 6-09.14 Partnership in Assisting Community Expansion

6-09.14-01. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Business” means a corporation, limited liability company, partnership, individual, or association involved in manufacturing, processing, value-added processing, and targeted industries as defined by the Bank of North Dakota.
  2. “Community” means the city or county in which an eligible business is located, or a local development corporation, community organization, or any other group whose interest is in the economic growth of the area.
  3. “Partnership in assisting community expansion fund” or “fund” means a fund established to buy down the interest rate on loans to businesses under this chapter.

Source: S.L. 1991, ch. 95, § 9; 1993, ch. 54, § 106; 2005, ch. 93, § 1; 2009, ch. 108, § 1.

6-09.14-02. Fund — Continuing appropriation — Administration.

A partnership in assisting community expansion fund is hereby established from a transfer of earnings from the Bank of North Dakota. This is a revolving fund, and all moneys transferred into the fund, interest on fund moneys, and payments to the fund are hereby appropriated for the purposes of this chapter. This fund is not subject to section 54-44.1-11. The Bank of North Dakota shall administer the fund.

Source: S.L. 1991, ch. 95, § 9.

6-09.14-03. Fund — Purpose — Interest rate buydown.

Moneys in the partnership in assisting community expansion fund must be used for the purpose of buying down the interest rate on loans made by a lead financial institution in participation with the Bank of North Dakota. The Bank of North Dakota’s participation may not exceed eighty percent nor be less than fifty percent of the total loans. If the loan is approved by the lenders and there is evidence of the community’s commitment and ability to fund its portion of the buydown, the fund’s participation in the buydown must automatically be approved. The community’s contribution of direct cash, loans, equity investments, land, property, or infrastructure may count toward the community’s funding of its portion of the buydown.

Source: S.L. 1991, ch. 95, § 9; 2013, ch. 88, § 2.

6-09.14-04. Fund moneys — Eligible uses.

  1. The fund moneys may be used to participate in an interest rate buydown on a loan to a new or expanding business for the following eligible uses:
    1. Purchase of real property and equipment.
    2. Expansion of facilities.
    3. Working capital.
    4. Inventory.
  2. The community shall determine the amount of the interest rate buydown and apply to the Bank of North Dakota for participation from the partnership in assisting community expansion fund. The funds for the community’s portion of the buydown may come from a local development corporation, contributions, community funds, future dedicated tax programs, or any other community source.
  3. The fund participation portion in the buydown must be determined by the Bank of North Dakota based on economic conditions in the city or county in which the business is located.
  4. The maximum amount from the fund in the interest rate buydown may not exceed five hundred thousand dollars per loan. The fund participation must be limited to the amount required to buy down the interest to five hundred basis points below the national prime interest rate.
  5. The Bank of North Dakota shall adopt rules to implement this chapter.

The loan funds cannot be used to refinance any existing debt or for the relocation of the business within North Dakota.

Source: S.L. 1991, ch. 95, § 9; 2013, ch. 88, § 3.

CHAPTER 6-09.15 Beginning Entrepreneur Loan Guarantee Program

6-09.15-01. Definitions. [Effective through August 31, 2022]

As used in this chapter, unless the context otherwise requires:

  1. “Beginning entrepreneur” means a resident of this state who:
    1. Has graduated from high school or has received a general equivalency certificate.
    2. Has had some training, by education or experience, in the type of revenue-producing enterprise which that person wishes to begin.
    3. Has, including the net worth of that person’s dependents and spouse, if any, a net worth of less than an amount determined by the Bank of North Dakota.
  2. “Child care provider” means a child care home, group, or center licensed by the department of human services.
  3. “Lender” means any lending institution that is regulated or funded under the laws of this state or the United States and which has provided financing to a beginning entrepreneur for the establishment of a qualified revenue-producing enterprise.
  4. “Loan guarantee” means an agreement that in the event of default by a beginning entrepreneur under a note and mortgage or other loan or financing agreement, the Bank of North Dakota shall pay the lender the amount agreed upon up to a percentage to be determined by the Bank of the amount of principal due the lender on a loan at the time the claim is approved from the loan guarantee fund.
  5. “Qualified revenue-producing enterprise” means any real property, buildings, improvements on the property or to the buildings, any equipment located on the property or in the buildings, and any personal property used or useful in connection with a revenue-producing enterprise engaged in any industry or business not prohibited by the Constitution of North Dakota or the laws of this state. The term does not include an enterprise for which a person is eligible under section 6-09-15.5 or chapter 6-09.8.

Source: S.L. 1999, ch. 89, § 1; 2007, ch. 97, § 1; 2011, ch. 85, § 2; 2013, ch. 45, §§ 20, 21.

6-09.15-01. Definitions. [Effective September 1, 2022]

As used in this chapter, unless the context otherwise requires:

  1. “Beginning entrepreneur” means a resident of this state who:
    1. Has graduated from high school or has received a general equivalency certificate.
    2. Has had some training, by education or experience, in the type of revenue-producing enterprise which that person wishes to begin.
    3. Has, including the net worth of that person’s dependents and spouse, if any, a net worth of less than an amount determined by the Bank of North Dakota.
  2. “Child care provider” means a child care home, group, or center licensed by the department of health and human services.
  3. “Lender” means any lending institution that is regulated or funded under the laws of this state or the United States and which has provided financing to a beginning entrepreneur for the establishment of a qualified revenue-producing enterprise.
  4. “Loan guarantee” means an agreement that in the event of default by a beginning entrepreneur under a note and mortgage or other loan or financing agreement, the Bank of North Dakota shall pay the lender the amount agreed upon up to a percentage to be determined by the Bank of the amount of principal due the lender on a loan at the time the claim is approved from the loan guarantee fund.
  5. “Qualified revenue-producing enterprise” means any real property, buildings, improvements on the property or to the buildings, any equipment located on the property or in the buildings, and any personal property used or useful in connection with a revenue-producing enterprise engaged in any industry or business not prohibited by the Constitution of North Dakota or the laws of this state. The term does not include an enterprise for which a person is eligible under section 6-09-15.5 or chapter 6-09.8.

Source: S.L. 1999, ch. 89, § 1; 2007, ch. 97, § 1; 2011, ch. 85, § 2; 2013, ch. 45, §§ 20, 21; 2021, ch. 352, § 7, effective September 1, 2022.

6-09.15-02. Loan guarantee fund — Administration.

A beginning entrepreneur loan guarantee fund is created to be used by the Bank of North Dakota to administer a beginning entrepreneur loan guarantee program to be used in conjunction with other loan programs. The fund includes moneys appropriated by the legislative assembly for administration of the program and all earnings, less any administrative charges, from the investment of those moneys. The Bank may retain any administrative charges necessary for the administration of the program established by this chapter. The fund is not subject to section 54-44.1-11.

Source: S.L. 1999, ch. 89, § 2.

6-09.15-03. Application for guarantee — Term — Annual fee.

A lender may apply to the Bank of North Dakota for a loan guarantee for a loan amount to be determined by the Bank. The Bank may approve a guarantee of a loan of up to five thousand dollars to a beginning entrepreneur for use by the beginning entrepreneur for accounting, legal, and business planning and other consulting or advisory services in planning for the establishment of a qualified revenue-producing enterprise. The Bank may approve a guarantee of a loan of up to twenty-five thousand dollars to a beginning entrepreneur without requiring the beginning entrepreneur to provide collateral for the loan. The term of a loan guarantee may not exceed five years. The Bank may charge a lender an annual fee during the term of a loan guarantee. Total outstanding guarantees under this program at the time of issuance may not exceed five percent of the Bank’s tier one capital as defined by the department of financial institutions.

Source: S.L. 1999, ch. 89, § 3; 2001, ch. 103, § 1; 2007, ch. 97, § 2; 2009, ch. 105, § 1; 2011, ch. 85, § 3.

Note.

Sections 3 of chapter 103, S.L. 2001, provides:

SECTION 3. LEGISLATIVE INTENT — BUSINESS STARTUP INFORMATION. It is the intent of the legislative assembly that the Bank of North Dakota provide each beginning entrepreneur who requests a loan guarantee information regarding other resources and services provided by local, state, federal, or private entities that are available to assist in the startup of a new business.”

6-09.15-03.1. Loan guarantee for child care facility.

A beginning entrepreneur who receives a loan for a child care facility must be a child care provider.

Source: S.L. 2013, ch. 45, § 22.

Effective Date.

This section became effective July 1, 2013.

6-09.15-04. Termination.

The Bank of North Dakota may terminate a loan guarantee upon the sale, exchange, assignment, or transfer of the beginning entrepreneur’s interest in the qualified revenue-producing enterprise. The Bank shall terminate a loan guarantee if the Bank determines that the loan guarantee was obtained by fraud or material misrepresentation of which the lender or seller has actual knowledge.

Source: S.L. 1999, ch. 89, § 4.

6-09.15-05. Rules.

Notwithstanding any provision of this chapter, the Bank of North Dakota shall adopt rules to implement this chapter. The rules may include a formula for determining the ratio of reserves in the loan guarantee fund to the amount of guaranteed loans, the maximum dollar amount of a guarantee, and the maximum allowable annual interest rate on a loan eligible for a guarantee.

Source: S.L. 1999, ch. 89, § 5.

CHAPTER 6-09.16 Nursing Facility Alternative Loans

6-09.16-01. Definitions.

Terms defined in chapter 50-30 have the same meaning when used in this chapter.

Source: S.L. 1999, ch. 429, § 1; 2001, ch. 431, § 1.

6-09.16-02. Long-term care facility loan fund — Continuing appropriation.

A revolving loan fund must be maintained in the Bank of North Dakota for the purpose of making loans to nursing facilities, basic care facilities, or assisted living facilities for renovation projects.

All moneys transferred into the fund, interest upon moneys in the fund, and collections of interest and principal on loans made from the fund are appropriated for disbursement pursuant to the requirements of this chapter.

Source: S.L. 1999, ch. 429, § 1; 2001, ch. 431, § 2.

6-09.16-03. Long-term care facility loan fund.

  1. There is created a long-term care facility loan fund. The fund consists of revenue transferred from the North Dakota health care trust fund, interest upon moneys in the fund, and collections of interest and principal on loans made from the fund.
  2. The Bank of North Dakota shall administer the loan fund. Funds in the loan fund may be used for:
    1. Loans as provided in this chapter and as approved by the department under chapter 50-30; and
    2. The costs of administration of the fund.
  3. Any money in the fund not required for use under subsection 2 must be transferred to the North Dakota health care trust fund.

Source: S.L. 1999, ch. 429, § 1; 2001, ch. 431, § 3.

6-09.16-04. Loan application — How made.

All applications for loans under this chapter must be made to the department. The department may approve the applications of qualified applicants that propose projects that conform to requirements established under chapter 50-30. The Bank of North Dakota shall review and approve or reject all loan applications forwarded to the Bank by the department. For applications approved by the Bank and upon final approval of the application by the department, loans may be made from the long-term care facility loan fund in accordance with this chapter.

Source: S.L. 1999, ch. 429, § 1; 2001, ch. 431, § 4.

6-09.16-05. Amount of loans — Terms and conditions.

Loans in an amount not exceeding ninety percent of project costs may be made by the Bank of North Dakota from the fund maintained pursuant to this chapter. Such loans must bear interest at a rate of two percent of the outstanding principal balance of the loan. In consideration of the making of a loan under this chapter, each borrower shall execute a contract with the department to operate the project in accordance with standards established under chapter 50-30. The contract must also provide that if the use of the project is discontinued or diverted to purposes other than those provided in the loan application without written consent of the department, the full amount of the loan provided under this chapter immediately becomes due and payable. The Bank of North Dakota may annually deduct, as a service fee for administering the loan fund maintained under this chapter, one-half of one percent of the principal balance of the outstanding loans from the fund.

Source: S.L. 1999, ch. 429, § 1; 2001, ch. 431, § 5.

6-09.16-06. Powers of Bank of North Dakota.

The Bank of North Dakota may do all acts or things necessary to negotiate loans and preserve security under this chapter, including the power to take such security as deemed necessary, to exercise any right of redemption, and to bring suit in order to collect interest and principal due the loan fund under mortgages, contracts, and notes executed to obtain loans under the provisions of this chapter. If the applicant’s plan for financing provides for a loan of funds from sources other than the state of North Dakota, the Bank of North Dakota may take a subordinate security interest. The Bank may recover from the loan fund amounts actually expended by it for legal fees and to effect a redemption.

Source: S.L. 1999, ch. 429, § 1; 2001, ch. 431, § 6.

CHAPTER 6-09.17 Biodiesel Partnership in Assisting Community Expansion [Renumbered]

[Redesignated as chapter 17-03 under S.L. 2007, ch. 204, § 5]

Note.

This chapter has been redesignated as chapter 17-03 pursuant to S.L. 2007, ch. 204, § 5.

6-09.17-01. Definitions.

[Redesignated under S.L. 2007, ch. 204, § 5.]

Note.

This section has been redesignated as section 17-03-01 pursuant to S.L. 2007, ch. 204, § 5.

6-09.17-02. Biofuel partnership in assisting community expansion fund — Continuing appropriation — Administration.

[Redesignated under S.L. 2007, ch. 204, § 5.]

Note.

This section has been redesignated as section 17-03-02 pursuant to S.L. 2007, ch. 204, § 5.

6-09.17-03. Fund — Purpose — Interest rate buydown.

[Redesignated under S.L. 2007, ch. 204, § 5.]

Note.

This section has been redesignated as section 17-03-03 pursuant to S.L. 2007, ch. 204, § 5.

6-09.17-04. Fund moneys — Eligible uses.

[Redesignated under S.L. 2007, ch. 204, § 5.]

Note.

This section has been redesignated as section 17-03-04 pursuant to S.L. 2007, ch. 204, § 5.

6-09.17-05. Partnership in assisting community expansion fund incentive limitation.

[Redesignated under S.L. 2007, ch. 204, § 5.]

Note.

This section, as enacted by section 25 of chapter ch. 14, S.L. 2007, has been redesignated as section 17-03-05 pursuant to S.L. 2007, ch. 204, § 5.

CHAPTER 6-09.18 Technology Advancement Innovation Loans

6-09.18-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Commissioner” means the commissioner of the department of commerce.
  2. “Committee” means the innovation loan fund to support technology advancement committee.
  3. “Diversification sectors” means the following industries:
    1. Advanced computing and data management;
    2. Agriculture technology;
    3. Autonomous and unmanned vehicles and related technologies;
    4. Energy;
    5. Health care;
    6. Value-added agriculture;
    7. Value-added energy; and
    8. Any industry or area specifically identified by the committee as an industry that will contribute to the diversification of the state’s economy.

Source: S.L. 2019, ch. 86, § 1, effective August 1, 2019.

6-09.18-02. Innovation loan fund to support technology advancement committee — Membership — Meetings.

  1. The innovation loan fund to support technology advancement committee consists of:
    1. The commissioner or the commissioner's designee who shall serve as the chairperson of the committee and is a nonvoting member of the committee;
    2. Three members representing active venture capital firms, private entities, or angel capital funds;
    3. One member with finance-related experience, knowledge, or education; and
    4. Three members from the private sector with expertise in the diversification sectors.
  2. The commissioner, in consultation with the president of the Bank of North Dakota, shall appoint the members of the committee. The term of office of the appointed members of the committee is four years, and the terms must be staggered so that no more than one of the members' terms appointed under subdivisions b and c of subsection 1 expires each year, and so that no more than one of the members' terms appointed under subdivision d of subsection 1 expires each year. Each term of office commences on the first day of July. Members serve at the pleasure of the commissioner and may be reappointed for additional terms. Members of the committee may not invest or otherwise participate in applied research, experimentation, or operational testing associated with a loan awarded under this chapter. If a committee member appointed under subdivision b of subsection 1 ceases to represent an active venture capital firm, private entity, or angel capital fund, that individual's membership on the committee ceases immediately and the commissioner, in consultation with the president of the Bank of North Dakota, shall appoint a new member to the committee for the remainder of the term.
  3. A committee member representing the private sector is eligible to receive compensation in an amount not exceeding one hundred thirty-five dollars per day and travel and expense reimbursement as provided by law for state officers for attending meetings of the committee.
  4. The committee shall meet as necessary to make loan recommendations and provide ongoing review of research, development, and commercialization activities.

Source: S.L. 2019, ch. 86, § 1, effective August 1, 2019.

Note.

Former section 6-09.18-02 was redesignated as section 17-03-02 pursuant to S.L. 2007, ch. 1462, § 5.

6-09.18-03. Innovation loan fund to support technology advancement — Innovation technology loan program.

The department of commerce shall administer the innovation technology loan program in consultation with the Bank of North Dakota to provide loans for activities identified in this chapter. The department of commerce shall provide administrative support for the program, including the drafting of application forms, receiving applications, reviewing applications for completeness and compliance with committee policy, and forwarding complete applications to the committee in accordance with the guidelines established by the committee. Program guidelines relating to ownership of intellectual property, inventions, and discoveries must address activities and issues unique to technologies, patents, and companies created as a result of a legacy innovation technology loan.

Source: S.L. 2019, ch. 86, § 1, effective August 1, 2019.

6-09.18-04. Innovation technology loans — Eligibility.

  1. The committee shall establish guidelines for entities to qualify for an innovation technology loan under this section. The committee shall consider and process applications in a timely manner that does not jeopardize an applicant's opportunity to leverage other funds.
  2. In determining whether to recommend approval of an application, the committee shall consider the extent to which the proposal will:
    1. Deliver applied research, experimentation, or operational testing in one or more of the diversification sectors to create information or data to enhance North Dakota companies or industries or companies making investments in North Dakota;
    2. Lead to the commercialization or patent of an innovation technology solution; or
    3. Result in the development of a new company or expansion of an existing company that will diversify the state's economy through new products, investment, or skilled jobs.
  3. The Bank of North Dakota shall review the business plan, financial statements, and other information necessary for the Bank to determine which applications recommended for approval by the committee will be approved by the Bank for final loan approval. The terms of the loan must include:
    1. Zero percent interest for the first three years of the loan;
    2. Two percent interest for the next two years of the loan; and
    3. An interest rate equal to a standard Bank of North Dakota loan for all subsequent years .
  4. To be eligible for a loan under this chapter, an entity shall agree to provide the Bank of North Dakota with information as requested by the Bank.

Source: S.L. 2019, ch. 86, § 1, effective August 1, 2019.

6-09.18-05. Innovation loan fund to support technology advancement — Continuing appropriation.

The innovation loan fund to support technology advancement is a special fund in the state treasury and must be administered by the department of commerce. All moneys in the fund are appropriated to the department of commerce on a continuing basis for the purpose of providing innovation technology loans and for administrative expenses. The department of commerce shall deposit in the innovation loan fund to support technology advancement all principal and interest paid on loans made from the fund. Interest earned on moneys in the fund must be credited to the fund.

Source: S.L. 2019, ch. 86, § 1, effective August 1, 2019.

6-09.18-06. Use of loan funds.

  1. Loan recipients shall use innovation technology loan funds to enhance capacity and, to the extent possible, leverage state, federal, and private sources of funding. An entity receiving a loan under this chapter may not use the funds for capital or building investments or for research or other activities not identified in this chapter. The funds may not be used for academic or instructive programming, workforce training, administrative costs, or to supplant funding for regular operations of institutions of higher education. Unless otherwise approved by the committee, loan recipients may use funding only to conduct applied research, experimentation, or operational testing within the state. If an entity awarded a loan no longer conducts its activities in the state, the interest rate of the loan shall default to the rate of a standard Bank of North Dakota loan .

Source: S.L. 2019, ch. 86, § 1, effective August 1, 2019.

6-09.18-07. Innovation loan fund to support technology advancement — Postaward monitoring.

Upon completion of work performed from funding provided by a loan, the department of commerce shall provide an independent review of the results. Evaluation criteria may include:

  1. How the work performed has contributed to the development of a company or the expansion of an existing company, has enhanced the ability of a company to make investments in the state, or otherwise enticed a company to invest or move to the state.
  2. How the work performed has led to additional economic investment of capital from public and private sector entities within and outside North Dakota.
  3. How the work performed has led to or may lead to a patent or research that is commercially viable.

Source: S.L. 2019, ch. 86, § 1, effective August 1, 2019.

CHAPTER 6-10 Agents for Deposits

6-10-01. License required to act as agent for deposits.

No person, partnership, association, corporation, or limited liability company, except as otherwise authorized by law, may engage in the business of receiving, as agent for another, moneys for the purpose of deposit in a bank, without first having applied to the commissioner and received a license so to do.

Source: S.L. 1943, ch. 89, § 1; R.C. 1943, § 6-1001; S.L. 1993, ch. 54, § 106.

6-10-02. License fee — Bond.

Such applicant shall pay to the commissioner an annual fee of twenty-five dollars, and shall furnish a bond to the state of North Dakota, executed by a corporate surety company authorized to do business in this state, in the sum of not less than five thousand dollars. Such bond from time to time may be increased by the commissioner whenever, in the commissioner’s judgment, the business of said licensee warrants.

Source: S.L. 1943, ch. 89, § 2; R.C. 1943, § 6-1002.

6-10-03. Limit on license.

No license may be granted for the purpose of conducting such business in any city wherein there already is operating a state or national bank or an authorized separate facility. In the event that a national or state bank or an authorized separate facility is authorized to do, and does commence doing business in any city where a license has been granted to operate a business under this section, such license may not thereafter be renewed.

Source: S.L. 1943, ch. 89, § 3; R.C. 1943, § 6-1003; S.L. 1995, ch. 79, § 21.

6-10-04. Agent must deposit funds as directed.

A licensee operating a business under the terms of this chapter may not loan any of the moneys given into the licensee’s custody by any depositor for deposit in a bank, but shall promptly transfer said funds to the bank designated by the depositor, and each depositor has the right to designate the bank in which the depositor desires such moneys deposited.

Source: S.L. 1943, ch. 89, § 4; R.C. 1943, § 6-1004.

6-10-05. Rules and regulations.

The commissioner is authorized to prescribe such rules and regulations for the operating of such business as in the commissioner’s judgment, from time to time, may be necessary for the protection of the depositors dealing with such licensee, and has the power to require compliance therewith.

Source: S.L. 1943, ch. 89, § 5; R.C. 1943, § 6-1005.

6-10-06. Duty of commissioner.

The commissioner may make an examination of the business of such licensee, and such applicant shall pay an examination fee. Fees for such examinations must be charged by the department of financial institutions at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the examinations provided for by this section. Fees must be paid to the state treasurer and deposited in the financial institutions regulatory fund.

Source: S.L. 1943, ch. 89, § 6; R.C. 1943, § 6-1006; S.L. 1979, ch. 143, § 2; 1987, ch. 111, § 3; 1989, ch. 96, § 8; 2001, ch. 88, § 30.

6-10-07. Revocation of license.

In the event of the failure of any person, partnership, association, corporation, or limited liability company to comply with the provisions of this chapter or the regulations promulgated by the commissioner as herein provided, the commissioner, after fifteen days’ notice in writing, may revoke such license. Such applicant, upon demand in writing served upon the commissioner, within ten days after the receipt of such notice as above provided, is entitled to a hearing with respect to such violation. The notice of revocation must specify the violations of law or regulations which constitute the grounds for such charges against such licensee.

Source: S.L. 1943, ch. 89, § 7; R.C. 1943, § 6-1007; S.L. 1993, ch. 54, § 106.

6-10-08. Penalty.

Any person violating the provisions of this chapter is guilty of a class A misdemeanor.

Source: S.L. 1943, ch. 89, § 8; R.C. 1943, § 6-1008; S.L. 1975, ch. 106, § 58.

CHAPTER 6-11 Investment Trust Companies [Repealed]

[Repealed by S.L. 1983, ch. 127, § 13]

CHAPTER 6-12 Housing Development Fund [Expired]

[Expired pursuant to S.L. 1999, ch. 90, § 10]

CHAPTER 6-13 Self-critical Analysis Privilege of Financial Institutions

6-13-01. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Commissioner” means the commissioner of financial institutions.
  2. “Compliance audit” means a voluntary, internal evaluation, review, assessment, audit, or investigation for the purpose of identifying or preventing noncompliance with, or promoting compliance with, laws, regulations, orders, or industry or professional standards, which is conducted by or on behalf of a financial institution.
  3. “Compliance self-critical analysis audit document” means a document prepared as a result of or in connection with a financial institution’s compliance audit. A compliance self-critical analysis audit document may include a written response to the findings of a compliance audit. A compliance self-critical analysis audit document may include, as applicable, field notes and records of observations, workpapers, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, exhibits, computer-generated or electronically recorded information, telephone records, maps, charts, graphs, and surveys, provided this supporting information is collected or developed for the primary purpose and in the course of a compliance audit. A compliance self-critical analysis audit document also includes:
    1. A compliance audit report prepared by an auditor, who may be an employee of the financial institution or an independent contractor, which may include the scope of the audit, the information gained in the audit, and conclusions and recommendations, with exhibits and appendices;
    2. Memoranda and documents analyzing portions or all of the compliance audit report and discussing potential implementation issues;
    3. An implementation plan that addresses correcting past noncompliance, improving current compliance, and preventing future noncompliance; or
    4. Analytic data generated in the course of conducting the compliance audit.
  4. “Financial institution” means any organization authorized to do business under state and federal laws relating to financial institutions, including a bank, the Bank of North Dakota, a savings bank, a trust company, a savings and loan association, or a credit union.

Source: S.L. 2001, ch. 104, § 1.

6-13-02. Self-critical analysis privilege created — Scope.

A compliance self-critical analysis privilege is created to protect the confidentiality of compliance self-critical analysis documents or communications in regard to their content relating to voluntary internal compliance audits conducted by financial institutions and persons in regard to activities regulated under title 6 or federal law, both to conduct voluntary internal audits of its compliance programs and management systems and to assess and improve compliance with state and federal statutes, rules, and orders. The compliance self-critical analysis privilege applies to all litigation or administrative proceedings pending on August 1, 2001.

Source: S.L. 2001, ch. 104, § 2.

6-13-03. Compliance self-critical analysis document not discoverable or admissible.

Except as provided in this chapter, a compliance self-critical analysis audit document is privileged information and is not discoverable or admissible evidence in any legal action in any civil, criminal, or administrative proceeding. The privilege is a matter of substantive law of this state and is not merely a procedural matter governing administrative, civil, or criminal procedures in the courts of this state.

Source: S.L. 2001, ch. 104, § 3.

6-13-04. Application of privilege.

If a financial institution, person, or entity performs or directs the performance of a compliance audit, an officer, employee, or agent involved with the compliance audit, or any consultant who is hired for the purpose of performing the compliance audit, may not be examined in any civil, criminal, or administrative proceeding as to the compliance audit or any compliance self-critical analysis audit document. This section does not apply if it is determined under section 6-13-06 or 6-13-07 that the privilege does not apply.

Source: S.L. 2001, ch. 104, § 4.

6-13-05. Submission to commissioner.

  1. Upon request of the commissioner, a financial institution must submit a compliance self-critical analysis audit document to the commissioner, or the commissioner’s designee, as a confidential document under the provisions of section 6-01-07, without waiving the privilege set forth in this chapter to which the financial institution would otherwise be entitled. However, the provisions of section 6-01-07 permitting the commissioner to release confidential documents and make them accessible to federal financial institution regulatory agencies does not apply to the compliance self-critical analysis audit documents voluntarily submitted. To the extent the commissioner has the authority to compel the disclosure of a compliance self-critical analysis audit document under other provisions of applicable law, any report furnished to the commissioner may not be provided to any other person or entity and must be accorded the same confidentiality and other protections as provided above for voluntarily submitted documents. Any use of a compliance self-critical analysis audit document furnished as a result of a request of the commissioner, whether under a claim of authority to compel disclosure or not, is limited to determining whether any disclosed defects in a financial institution’s policies or procedures or inappropriate treatment of customers has been remedied or that an appropriate plan for their remedy is in place. The commissioner may not impose any type of administrative fine or penalty as to any area addressed or matter covered in a compliance self-critical analysis audit document furnished at the commissioner’s request, except when there is clear and convincing evidence that the financial institution failed to undertake reasonable corrective action, eliminate inappropriate treatment of customers, or failed to implement an appropriate plan to rectify any noncompliance with state and federal statutes, rules, and orders.
  2. A financial institution’s compliance self-critical analysis audit document submitted to the commissioner remains subject to all applicable statutory or common-law privileges, including the work product doctrine, attorney-client privilege, or the subsequent remedial measures exclusion. A compliance self-critical analysis audit document submitted to and in the possession of the commissioner remains the property of the financial institution and is not subject to any disclosure or production under section 44-04-18.
  3. Disclosure of a compliance self-critical analysis audit document to a governmental agency, whether voluntary or pursuant to compulsion of law, does not constitute a waiver of the privilege with respect to any other person or any other governmental agency.

Source: S.L. 2001, ch. 104, § 5.

6-13-06. Waiver of privilege by financial institution — Grounds for determination of privilege — Civil, administrative, or criminal proceedings.

  1. The self-critical analysis privilege does not apply to the extent that it is expressly waived by the financial institution that prepared or caused to be prepared the compliance self-critical analysis audit document.
  2. In a civil or administrative proceeding, a court of record, after an in camera review, may require disclosure of material for which the privilege is asserted, if the court determines one of the following:
    1. The privilege is asserted for a fraudulent purpose; or
    2. The material is not subject to the privilege.
  3. In a criminal proceeding, a court of record, after an in camera review, may require disclosure of material for which the privilege is asserted, if the court determines one of the following:
    1. The privilege is asserted for a fraudulent purpose;
    2. The material is not subject to the privilege; or
    3. The material contains evidence relevant to commission of a criminal offense, and all three of the following factors are present:
      1. The commissioner, state’s attorney, or attorney general has a compelling need for the information;
      2. The information is not otherwise available; and
      3. The commissioner, state’s attorney, or attorney general is unable to obtain the substantial equivalent of the information by any other means without incurring prohibitive cost and delay.

Source: S.L. 2001, ch. 104, § 6.

6-13-07. Determination of privilege — Procedure.

  1. If a person seeks from a financial institution communications involving a compliance audit or any compliance self-critical analysis audit document during the course of a pending civil or criminal proceeding, the financial institution may assert the self-critical analysis privilege and provide the information set forth in subsection 6 during the course of those proceedings just as any other privilege is asserted in the courts of this state. If the court is required to make a determination as to the privilege, the court shall follow the procedure and conditions set forth in subsection 5.
  2. If there is a pending administrative proceeding, or there is no pending civil or criminal proceeding, the commissioner, state’s attorney, or attorney general may serve on a financial institution a written request by certified mail for disclosure of a compliance self-critical analysis audit document. Within thirty days after the commissioner, state’s attorney, or attorney general serves on a financial institution a written request by certified mail for disclosure of a compliance self-critical analysis audit document, the financial institution that prepared or caused the document to be prepared may file with the appropriate court a petition requesting an in camera hearing on whether the compliance self-critical analysis audit document or portions of the document are privileged under this chapter or subject to disclosure. The court has jurisdiction over a petition filed by a financial institution under this subsection requesting an in camera hearing on whether the compliance self-critical analysis document or portions of the document are privileged or subject to disclosure. Failure by the financial institution to file a petition waives the privilege for only the specific request made.
  3. A financial institution asserting the compliance self-critical analysis privilege in response to a request for disclosure under this section shall include in its request for an in camera hearing all of the information set forth in subsection 6.
  4. Upon the filing of a petition under this section, the court shall issue an order scheduling, within forty-five days after the filing of the petition, an in camera hearing to determine whether the compliance self-critical analysis audit document or portions of the document are privileged under this chapter or subject to disclosure.
  5. The court, after an in camera review, may require disclosure of material for which the privilege is asserted if the court determines, based upon its in camera review, that any one of the conditions set forth in subsection 2 of section 6-13-06 is applicable as to a civil or administrative proceeding or that any one of the conditions set forth in subsection 3 of section 6-13-06 is applicable as to a criminal proceeding. Upon making such determination, the court may only compel the disclosure of those portions of a compliance self-critical analysis document relevant to issues in dispute in the underlying proceeding. A compelled disclosure may not be considered to be a public document or be deemed to be a waiver of the privilege for any other civil, criminal, or administrative proceeding. A financial institution unsuccessfully opposing disclosure may apply to the court for an appropriate order protecting the document from further disclosure.
  6. A financial institution asserting the compliance self-critical analysis privilege in response to a request for disclosure under this section shall provide at the time of making and filing any objection to the disclosure all of the following information:
    1. The date of the compliance self-critical analysis audit document;
    2. The identity of the entity conducting the audit;
    3. The general nature of the activities covered by the compliance audit; and
    4. An identification of the portions of the compliance self-critical analysis audit document for which the privilege is being asserted.

Source: S.L. 2001, ch. 104, § 7.

6-13-08. Privilege — Burden of proof — Stipulation.

A financial institution asserting the compliance self-critical analysis privilege set forth in this chapter has the burden of demonstrating the applicability of the privilege. Once a financial institution has established the applicability of the privilege, a party seeking disclosure has the burden of proving that the privilege is asserted for a fraudulent purpose. The commissioner, state’s attorney, or attorney general seeking disclosure of the privilege has the burden of proving the elements set forth in subdivisions a and c of subsection 3 of section 6-13-06.

The parties may at any time stipulate in proceedings under section 6-13-06 or 6-13-07 to entry of an order directing whether the specific information contained in a compliance self-critical analysis audit document is or is not subject to the privilege provided under this chapter. Any such stipulation may be limited to the instant proceeding and, absent specific language to the contrary, is not applicable to any other proceeding.

Source: S.L. 2001, ch. 104, § 8.

6-13-09. Nonapplication of privilege.

The self-critical analysis privilege set forth in this chapter does not extend to:

  1. Documents, communications, data, reports, or other information expressly required to be collected, developed, maintained, or reported to a regulatory agency pursuant to this title, or other federal or state law;
  2. Information obtained by observation or monitoring by any regulatory agency; or
  3. Information obtained from a source independent of the compliance audit.

Source: S.L. 2001, ch. 104, § 9.

CHAPTER 6-14 Unauthorized Use of Name or Logo

6-14-01. Unlawful use of name or logo.

A person may not use the name or logo of any bank, trust company, savings association, or savings bank or of an affiliate of such financial institution in connection with the sale, distribution, offer for sale, advertisement, or promotion of any product or service without first obtaining the written consent of the bank, trust company, savings association, savings bank, or affiliate. A person may not use the name or logo of a bank, trust company, savings association, savings bank, or affiliate in a manner that will make it difficult to understand or will mislead an individual about the source of origin, affiliation, or sponsorship of a product or service or about the true identity source of a communication regardless of the nature of the communication.

Source: S.L. 2005, ch. 95, § 1.

6-14-02. Civil liability — Attorney’s fees.

A person that violates this chapter is civilly liable to the bank, trust company, savings association, savings bank, or affiliate for each unlawful use of a name or logo in the amount of one thousand dollars or actual damages, whichever is greater, plus reasonable attorney’s fees.

Source: S.L. 2005, ch. 95, § 1.

6-14-03. Injunction.

A court may enjoin the use of a name or logo which violates this chapter. An action for injunction under this section is in addition to any other remedy that may be available.

Source: S.L. 2005, ch. 95, § 1.

6-14-04. Penalty.

A person that willfully violates this chapter is guilty of a class B misdemeanor.

Source: S.L. 2005, ch. 95, § 1.